Case Law Update: Voluntary Overtime Impacts Holiday Pay Calculations

In a landmark judgement, the Court of Appeal ruled in June that voluntary overtime needs to be taken into account when calculating holiday pay if it’s ‘sufficiently regular and settled’.

If you want a quick summary of the case and the main takeaway points, you can skip ahead to our Too Long; Didn't Read section here.

East of England Ambulance NHS Trust v Flowers

The Law

Under the Working Time Directive (WTD), all workers in EU Member States are entitled to at least four weeks of annual leave if they work five days a week.

Under the Working Time Regulations 1998 (WTR), the UK provides an additional 1.6 weeks of leave.

Whilst on holiday, workers should be paid normally as if they were at work. For example, if they take a week off, they should be paid for a week’s work.

However, a major issue that both UK and EU courts have looked into is the impact that overtime could potentially have on holiday pay.

If workers regularly work shifts that overrun and, in these situations, are therefore expected to work overtime as a part of their contract, should this be taken into account when calculating their holiday pay?

Likewise, if the workers regularly work overtime voluntarily, should this also be included?

Flowers examined both of these questions.

Background to the case

The claimants in this case worked under contracts which incorporated the NHS Terms and Conditions of Service.

Due to the nature of their roles, they were all required to work shift overruns in specific situations, such as the shift ending in an emergency.

In these situations, referred to as ‘non-guaranteed overtime’, the claimants were paid at a rate of time and a half.

In addition to this, the claimants were also offered voluntary overtime shifts.

There was no contractual obligation on them to work these shifts and the Trust would be prepared to make alternative arrangements if the claimants were not available, such as using bank or agency staff.

As the pay the claimants received whilst on annual leave didn’t include their non-guaranteed or voluntary overtime, they therefore brought a claim to the employment tribunal (ET) for unlawful deductions from pay.

What did the Employment Tribunal say?

The ET found that the terms and conditions under which the claimants operated entitled them to have the ‘non-guaranteed overtime’ taken into account in holiday pay calculations, but not their voluntary overtime.

This was because non-guaranteed overtime didn’t permit the claimants to leave their job in times of an emergency and was a part of their contractual obligations. However, the voluntary overtime was not compulsory, followed no clear pattern and was not depended on by the Trust.

What did the Employment Appeal Tribunal say?

The claimants appealed this decision to the Employment Appeal Tribunal (EAT) who found that the voluntary overtime should also be included in holiday pay.

They outlined that the principle of the WTR was to ensure that normal payment was provided during periods of holiday.

Items which are not usually paid, or are exceptional, don’t count. However, items that are usually paid and regular across time may do so.

What did the Court of Appeal say?

The Trust appealed against the findings of the EAT to the Court of Appeal, who dismissed their appeal.

The Court outlined that the question to consider in these situations is whether the overtime is ‘sufficiently regular and settled’.

Crucially, there was no separate requirement that the hours of work are compulsory under the contract.

Takeaway points

This case is a significant ruling and an onus has been placed on employers to consider if any voluntary overtime currently worked in their company is ‘regular and settled’ and if it should therefore be taken into account when calculating holiday pay.

Going forward, employers should implement common sense when establishing this. Particularly, the overtime should be regular and considered typical within the relevant payment period.

Although this is currently the highest ruling on the topic of overtime and holiday pay, it should be remembered that it only applies to the four weeks provided by the WTD.

There is also scope for this decision to be appealed to the Supreme Court.

TL;DR

The claimants worked under contracts and were required to work shift overruns for which they were paid time and a half. They were also offered voluntary overtime shifts. Their pay didn’t include their non-guaranteed or voluntary overtime, so they went to tribunal.

The ET found the claimants were entitled to have shift overruns taken into account when calculating holiday pay. The case went to the EAT. They found that voluntary overtime should also be included in holiday pay.

Going forward you should apply common sense when calculating holiday pay—consider regular and typical overtime in the relevant payment period.

Expert support

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