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Holiday pay: Court of Appeal gives guidance on voluntary overtime

11 June 2019
Hospitality and Leisure

In the case of Flowers and others v East of England Ambulance Trust ("the Trust") the Court of Appeal has found that employees of the Trust were entitled to have voluntary overtime taken into account when calculating holiday pay.

The Court considered the overtime payments from both a contractual and a Working Time Directive ("WTD") perspective (WTD rather than Working Time Regulations 1999 ("WTR") as the Trust is an emanation of the state and so the WTD has direct effect).

 

Background

The current case centred on holiday pay claims brought by the Trust's employees arguing that their holiday pay calculation had failed to include:

  • Non-guaranteed overtime.
  • Voluntary overtime.

The non-guaranteed overtime occurs when an employee is at the end of a shift but is in the middle of a job which must be completed. The voluntary overtime occurs where an employee genuinely volunteers for an extra shift.

Clause 13.9 of the NHS contract states:

"Pay during annual leave will include regularly paid supplements, including any recruitment and retention premia, payments for work outside normal hours and high cost area supplements. Pay is calculated on the basis of what the individual would have received had he/she been at work. This would be based on the previous three months at work or any other reference period that may be locally agreed."

 

The Employment Tribunal

From a contractual perspective, the Tribunal found that non-guaranteed overtime should be included in the holiday pay calculation but that voluntary overtime should not.

The Trust conceded the WTD claim in respect of non-guaranteed overtime following Bear Scotland v Fulton.

 

The EAT

When considering the contractual claim, the EAT found that the correct holiday pay calculation should include all overtime worked, whether non-guaranteed or voluntary. The purpose of clause 13.9 was to ensure the employee received holiday pay in line with what he/she would have received had they been in work, based on a three-month reference period (or as otherwise agreed).

When considering the WTD claim, the EAT focused on the case of Dudley Metropolitan Borough Council v Willets which confirmed the overarching principle that normal remuneration must be maintained in respect of annual leave, as guaranteed by Article 7 of the WTD.  The claims would need to be remitted for a case-by-case assessment to consider whether the pattern of voluntary overtime was paid with sufficient regularity to constitute "normal pay".  The case was appealed to the Court of Appeal. 

 

Court of Appeal

The Court agreed with the EAT that the Claimants have a contractual entitlement to have voluntary overtime taken into account for the purposes of calculating holiday pay.  There is no basis for distinguishing between voluntary and non-guaranteed overtime payments for this purpose. 

The Court of Justice of the European Union ("CJEU") decision in the case of Hein v Albert Holzkamm GmbH ("Hein") was also helpfully considered by the Court of Appeal. Interpreting the WTD, the decision of the CJEU in Hein brought into question whether voluntary overtime should be included within holiday pay, unless the individual is contractually required to work overtime.  The Court of Appeal found that this could not be what the CJEU had intended and that the CJEU did not intend to perform a "handbrake turn" on what they have previously found.  The CJEU in Hein was merely distinguishing between exceptional and unforeseeable overtime payments on the one hand (which would not form part of normal pay) and regular and predictable ones on the other (which would form part of normal pay). 

 

Comment

The outcome of this case is consistent with UK case law to date.  The Court of Appeal opted not to refer the case to the CJEU over the Hein query for two reasons: 1) the Claimants had already won their case on the contractual element; and 2) with the onset of Brexit, the CJEU may not have jurisdiction for much longer.  We will keep you updated on any appeal to the Supreme Court. 

It is worth noting that voluntary overtime need only be included in the holiday pay calculation when it is considered to be part of normal remuneration (paid with sufficient regularity etc).  Employers need to be mindful not to inadvertently create contractual obligations to holiday pay that includes voluntary overtime regardless of whether it is paid with sufficient regularity. 

Further Reading

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