The Employment Appeal Tribunal (EAT) in the UK has recently considered whether voluntary as well as non-guaranteed overtime should be taken into account in calculating the amount of holiday pay. The question arose both under the terms and conditions of the claimants’ employment, but also pursuant to the EU Working Time Directive (No.2003/88) (WTD).

The case involved a group of employees in an NHS trust, who brought claims for unlawful deductions from wages, relating to two types of overtime – non-guaranteed overtime and voluntary overtime. Non-guaranteed overtime related to payments, where, at the end of a shift, one of the employees was obliged to work extra time to finish a task. The claimants were also completely free to choose whether or not to work any voluntary overtime shifts.  The first claim was in relation to the terms and conditions of employment of the employees which stated that pay during annual leave was “calculated on the basis of what the individual would have received had he/she been at work”. The employees also brought a claim under Article 7 of the WTD.

The Employment Tribunal initially held that the employees contractual terms and conditions entitled them to have their non-guaranteed overtime taken into account in the calculation of their holiday pay, but not the voluntary overtime.   With regard to the WTD claim, the employer conceded that non-guaranteed overtime should also be taken into account under the WTD following the decision in Bear Scotland Ltd v Fulton (2015), but the Employment Tribunal held that voluntary overtime did not form part of the claimants “normal remuneration” and therefore did not have to be considered.

The claimants therefore appealed the Employment Tribunal’s findings that voluntary overtime did not need to be included in the calculation under either the terms or conditions or Article 7 of the WTD, and the employer cross-appealed the finding that the contract required the claimants non-guaranteed overtime to be taken into account when calculating holiday pay.

The EAT noted firstly that the tribunal has not had the benefit of the recent decision of the EAT in Dudley Metropolitan Borough Council v Willetts (2018), (Holiday pay – Regular voluntary overtime should be included – 18 August 2017) which held that the overarching principle established by the case law  is that “normal remuneration” must be maintained in respect of the period of annual leave guaranteed by Article 7.  This meant that payments in respect of voluntary remuneration should be taken into account where they have been paid over a sufficient period of time and which formed a regular and settled pattern. As such, the determination of whether each claimant had a pattern of overtime which was sufficiently regular to fall within “normal remuneration” would need to be remitted to another tribunal.

In relation to the contractual claim, the EAT held that references to “pay” in the contract terms did not have to be limited to basic pay. The clause should be read as a whole and  its intention was to maintain the overall level of remuneration which the employee would have received if working.  This construction also accorded with the WTD.  As such there was no basis to distinguish between non-guaranteed and voluntary overtime in the contractual term.

This case again shows the difficulties employers face in arguing that voluntary overtime should be excluded from holiday pay. In principle it can be taken into account and it is then a question of fact as to whether it is regular and sufficiently settled to fall within the definition of “normal remuneration”.  It is likely that this case will be appealed and we will keep you updated.

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