As we have said many times before on this blog, it is all very well for the Courts and Tribunals to say that overtime must be “taken into account” for holiday pay purposes. What is missing for employers are answers to the key issues of how and when, the practical questions which all the senior Court rulings on holiday pay have so far found ways of ducking.

Pity then poor Employment Judge Warren in the Birmingham Tribunal, forced into those “uncharted waters” (his own phrase) in Brettle and Others -v- Dudley MBC. Faced with a variety of overtime working patterns, which counted as “normal pay” for holiday pay purposes and which did not?

There is no statutory definition of “normal pay“, which is not a great start, and the Court in Bear Scotland shed what was actually no extra light at all on this with its insight: “normal pay is what is normally received“. However, the problem is made worse by the guiding principles in the underlying EU cases which set this whole holiday pay thing off. In particular, the European Court of Justice said in BA -v- Williams in 2012 that “the purpose of the requirement for payment … is to put the worker during … leave in a position which is, as regards remuneration, comparable to periods of work“. EJ Warren re-phrased this as a requirement that holiday “remuneration must enable an individual to enjoy, during rest and relaxation, economic conditions comparable to those relating to the exercise of his employment“. In other words, the employee should suffer no financial disadvantage in taking holiday. A simple enough proposition, at least until you try to apply it to some real facts.

There were three employees in Brettle who did overtime at some level, being P, W and C. P did some voluntary overtime but only “very rarely“. There is no indication of what that actually meant in statistical terms, but it was clearly not enough to count as regular or normal and so he was unsuccessful in his claim on this point.

W’s evidence was that although his overtime was voluntary, there was a clear expectation in his job description that he would do it, and recently he had completed seven Saturdays in succession. On that basis, his overtime was seen as “not unusual or rare but regular” and hence as part of normal pay. C’s position was very similar, with the same outcome.

OK, but if W or C took all or any of the Monday to Friday off and still worked the usual overtime on the Saturday, they would suffer no loss of overtime and so there should be no claim to include allowance for it in their holiday pay for the days off. Unfortunately there is a clear potential inconsistency between including overtime which is regular or normal on the one hand, and ensuring that the employee is not financially disadvantaged by any particular period of leave on the other. The Tribunal here ran those propositions together: “the employee …….. must receive normal or average remuneration so as not to suffer a financial disadvantage“. However, while that might be true in some cases, it will certainly not be so in all, as here. W and C could easily take holidays in the week without it affecting their Saturday overtime at all. Alternatively, W might have worked seven Saturdays on the trot due to a period of heavy but short-lived demand, and otherwise do overtime only occasionally. What then?

We remain in a most unsatisfactory position for employers. Happily for Judge Warren, but not for any observer trying to glean an indication of how to apply these principles to his own business, the three Claimants here operated at opposite extremes of the overtime spectrum. But what if they did not? When does “rarely” become infrequently, now and again, periodically, occasionally, from time to time, and does that make any difference? How much turns on the Tribunal’s chance of adverbs? How can employers hope to make these principles work without being able to assess definitively at any given point whether the employee’s recent overtime history makes it part of his normal pay or not? Similarly, if I am an employee trying to maximise my holiday pay, for how long in advance of my leave do I have to work like a lunatic in order to impact my normal pay? We need urgent clarification of whether the defining test here is the easy but potentially unrepresentative recent average pay, or the pay the employee would have received if he had not been on leave. They may be very different.

Lesson for Employers

The List of Issues agreed between the parties here for the Tribunal to consider asked “[is the overtime] paid … with sufficient regularity to be considered as part of normal remuneration?”. We would advise employers to ask their Tribunals to consider the simpler question from Williams first – “has the employee been put at a financial disadvantage through going on the holiday for which the underpayment is claimed?“. If he cannot get past that, we would say that issues of what constitutes normal pay, etc., should not arise.