Flowers v East of England Ambulance Trust (Employment Appeal Tribunal)
The EAT has re-emphasised the fact that entirely voluntary overtime payments should be factored into the calculation of holiday pay where they are made over a sufficient period of time on a regular or recurring basis, so as to justify the label ‘normal remuneration’.
Employees of the relevant ambulance trust worked irregular overtime which was classified as either: (i) non-guaranteed shift-overrun periods, to undertake mandatory work that exceeded the end of a scheduled shift; and (ii) genuinely voluntary overtime for which they signed up of their own accord. The employees considered that their holiday pay should factor in such overtime payments, relying in part on their contracts stating that holiday pay would include ‘regularly paid supplements… including payments for work outside normal hours’ because it reflected their usual pay, when calculated over a 3 month reference period. They advanced claims for unlawful deductions of holiday pay on the basis of both this contractual wording and their general right to receive ‘normal remuneration’ whilst on holiday under the Working Time Directive (“WTD”), as interpreted within EU and UK case law.
The Tribunal distinguished between the two types of overtime, holding that whilst nonguaranteed shift-overrun payments should form part of ‘normal remuneration’ under both the relevant contractual provision and the WTD, whether or not an individual worked voluntary overtime was at their absolute discretion and so should not be included when calculating holiday pay. On appeal against the latter point, the EAT disagreed. It held that previous case law had clearly established that voluntary overtime payments should be factored into holiday pay calculations where it was carried out over a sufficient period of time on a regular and/or recurring basis so as to justify the description ‘normal’. Working patterns must therefore be assessed on a case-by-case basis as a matter of fact – a task which was remitted for completion by the Tribunal.
This case re-emphasises that when assessing holiday pay, an employer should focus on an employee’s regular remuneration in fact, regardless of whether elements of pay are due in respect of voluntary or non-contractual overtime. This will inevitably require case-by-case assessment and lead to increased costs but failure to do so will create a latent ticking-timebomb liability