The EAT has delivered its judgment on yet another holiday pay claim. The areas of “grey” that exist around holiday pay are gradually being reduced.
In Flowers & others v East of England Ambulance Trust the issues were should holiday pay be calculated by reference to
(i) Non-guaranteed overtime; or
(ii) Voluntary overtime?
There were two elements to each of these claims a contractual claim and a Working Time Directive (WTD) claim.
The Employment Tribunal had held that as a matter of contract non-guaranteed overtime should be taken into account for the purposes of calculating holiday pay but not voluntary overtime. Under the Working Time Directive claim the trust conceded that non-guaranteed overtime needed to be taken into account, however, the Tribunal held that voluntary overtime was not taken into account.
The EAT concluded that both as a matter of contract and under the WTD that voluntary overtime should be taken into account when calculating holiday pay. In reaching its decision the EAT derived a series of propositions from preceding case law, including:
(i) The overarching principle is that normal remuneration must be maintained during a period of annual leave guaranteed by the Working Time Directive.
(ii) Payments in respect of overtime – whether compulsory, non-guaranteed or voluntary constitute remuneration.
(iii) For a payment to be “normal” remuneration it must have been paid over a sufficient period of time. This will be a matter of fact and degree.
(iv) A decisive criterion to determine whether something is “normal” remuneration is whether there is an intrinsic link between payment and performance of tasks that the worker is required to carry out.
(v) However, it is not the only decisive test, what matters is the overarching principle and its object.
The EAT refused to accept that because over-time was voluntary, it was not linked to the contract. As a result it found that the Tribunal had been incorrect to hold that voluntary over-time necessarily fell outside of the calculation for annual leave. The contractual claim for voluntary over-time was also upheld.
The Working Time Directive was introduced as a health & safety measure. Maintenance of the “overarching principle” is regarded as particularly important to ensure that workers have enough rest. Overtime payments will generally always be linked to performance. The only real area for debate is the question of whether as a matter of fact and degree overtime can be said to be normal.
In the Tribunal evidence had been given that “it could not be said that for everyone voluntary overtime was something they normally did.” It seems likely that the question a tribunal will need to ask, in each case, is whether overtime was normal for each applicant, which could lead to the result that for some workers it is and for others it is not.
Although the decision does not take matters much further forward it does make it clear that voluntary over-time and non-guaranteed overtime are capable of being taken into account provided that they are paid over a sufficient period of time. Employers faced with claims that overtime should be taken into account for the purposes of holiday pay should focus their defence on demonstrating why, for that particular worker, overtime payments should not be considered normal remuneration.
If you have issues or concerns in respect of holiday pay claims or potential holiday pay claims please contact Barry Stanton at [email protected] or your normal adviser.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.