The Court of Appeal (‘CA’) in the case of Flowers v East of England Ambulance Trust has held that voluntary overtime is to be included in the calculation of holiday pay if that overtime is sufficiently regular and settled.
This case concerned a number of claimants, including Mr Flowers, (‘the Claimants’) who were employed by East of England Ambulance Trust (‘the Respondent’) in a range of roles concerned with the provision of ambulance services. The Claimant’s contended that the calculation of their holiday pay should take account of overtime in two categories, known as non-guaranteed overtime and voluntary overtime.
Non-guaranteed overtime occurs where the Claimants’ are carrying out a task which must be completed after the end of the shift. The Employment Tribunal (‘ET’) held that that the Claimants’ contractual terms and conditions entitled them to have non-guaranteed overtime taken into account in the calculation of their holiday pay.
As for voluntary overtime, the Claimant’s may be offered it, but none of the Claimants are or have ever been required or expected to volunteer for overtime shifts and all of the Claimants are and have always been completely free to choose whether or not to work any voluntary overtime shifts. The ET held that the non-voluntary overtime would not be taken into account in the calculation of holiday pay.
The Claimant’s appealed to the Employment Appeal Tribunal (‘EAT’) contending that voluntary overtime should have been taken into account (under both their contract and the Working Time Directive) in the calculation of holiday pay.
The EAT held that voluntary overtime indeed should have been taken into account under the Working Time Directive.
The Respondent applied for permission to appeal, which was granted on the grounds that the question of whether the calculation of holiday pay should take account of voluntary overtime was an issue of some general importance which justified consideration by the Court of Appeal (‘CA’).
The CA agreed with the EAT. The CA stated that voluntary overtime should be counted when calculating holiday pay if it is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration.
It was held that that the sole test of whether a payment constitutes normal remuneration is the existence of an intrinsic link between the payment and the performance of tasks required under the contract of employment.
The nature of annual leave, as a fundamental right, has been emphasised again and again by European legislation and case law. The policy set out in Article 7 of the Working Time Directive has been repeated in the European Charter of Fundamental Rights (chapter 31). The CJEU has repeatedly stated that there must be no disincentive to workers taking the minimum period of annual leave and that unless normal remuneration is maintained, there is a disincentive.
In light of this, it has been emphasised that the exclusion of payments for voluntary work which is normally undertaken by the employee in question would offend the overarching principle and would give rise to the real risk of pay structures being fragmented in order to minimise levels of holiday pay.
- Implication for Employers
It will be important to bear in mind the holiday pay policy’s that each employer has, and that if voluntary overtime performed is closely linked to performance of tasks required under the contract, holiday pay shall be calculated taking into account that voluntary overtime. It is advised that best practice in calculating this would be to look at average pay over a suitable reference period, prior to the holiday period. As this area of law carries many complexities, it is recommended that legal advice is sought before any alternations to policies are made.