A ruling by the Employment Appeals Tribunal in Flowers v East of England Ambulance Trust gives NHS staff employed under the “Agenda for Change” terms and conditions of employment the right to have all voluntary overtime payments included in their holiday pay even if they are not regularly worked.  As a result of this being a contractual right, these staff can recover underpayments going back up to six years.

Legal background – holiday pay

Workers are entitled to receive “normal pay” when they go on holiday.  The holiday pay of workers without normal hours is worked out by averaging all of their earnings over the previous 12 weeks.  However, historically, workers with normal hours have only been entitled to receive basic pay when they go on holiday. 

This position has been subject to a number of legal challenges and it is now clear that in the context of overtime payments, both non-guaranteed and voluntary overtime payments must be included in holiday pay if they are regularly paid or part of a settled pattern of work.

Most holiday pay claims of this nature are brought under the Employment Rights Act 1996 as a series of unlawful deductions. 

Even if a worker can prove they have been underpaid over a number of years, technical arguments can usually be deployed by employers to restrict their claim to the current holiday year.  Even if the worker can overcome these arguments the law provides that any claims issued after 1 July 2015 cannot go back further than two years. 

Facts

The workers in this case worked for the ambulance service.  They worked both non-guaranteed overtime and voluntary overtime.  Non-guaranteed overtime was included in their holiday pay but voluntary overtime was not.  They argued that they had both a statutory and contractual right to have this included.

The workers contractual right to receive paid holiday was set out in the NHS terms and conditions of service.  This provided:

“Pay during annual leave will include regularly paid supplements …(and) payments for work outside normal hours … .  Pay is calculated on the basis of what the individual would have received had he/she been at work.  This would be based on the previous three months at work or any other reference period that may be locally agreed.”

The Trust argued that under the terms of its contract voluntary overtime did not amount to pay.

Decision

The Employment Appeals Tribunal relying on Dudley Metropolitan Borough Council v Willetts said that voluntary overtime must be included in holiday pay if it was regularly worked or formed part of a pattern and the case was remitted back to the original Tribunal to determine this.  The Trust indicated that it had evidence which proved that not all workers “normally” worked overtime.

However, with regard to the contractual claim, the EAT said that voluntary overtime clearly amounted to “pay” and in accordance with the terms of that contract all workers were entitled to have this included in their holiday pay calculations.  There was no need for this to have been regularly worked.  Therefore, any overtime pay received in the three months prior to a holiday would be included in the calculation of holiday pay.

Implications

This decision has huge implications for workers engaged under the NHS “Agenda for Change” terms and conditions.  Workers can now issue contractual claims going back up to six years to recover underpaid holiday.  I have not seen any estimates, but this is likely to amount to millions of pounds.

The decision is only relevant to other employers who have contractual provisions similar to those adopted by the NHS (which would be rare in the private sector).  Workers with contracts of employment which give them the right to receive paid holiday (but don’t specify how that is calculated) will not have the right to bring similar contractual claims and employers who have not included voluntary overtime in holiday pay calculations do not need to fear receiving a glut of expensive historic claims.

Arguments will remain for those who do not have such contractual clauses as to whether overtime forms a “normal” part of an individual’s pay or not.  The debates rumble on!