In Flowers and others v East of England Ambulance Trust UKEAT/0235/17, the Employment Appeal Tribunal considered whether both non-guaranteed and voluntary overtime should be taken into account when calculating holiday pay.

Facts

The claimants worked for the East of England Ambulance Trust (the Trust) in a variety of roles concerning the provision of ambulance services.

Overtime at the Trust fell into two categories: (1) non-guaranteed overtime (also referred to as shift overrun payments), which applied where, at the end of a shift, an employee was in the middle of a task that they had to complete before they could leave; and (2) voluntary overtime, which applied where employees volunteered for overtime shifts. Although mandatory, non-guaranteed overtime was irregular. Voluntary overtime was genuinely voluntary and was also irregular.

The claimants' contracts of employment provided that pay during annual leave would "include regularly paid supplements, including… payments for work outside normal hours…" and that pay would be 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 claimants brought claims in the employment tribunal (ET) for unlawful deductions for wages, alleging that they had been underpaid holiday pay. They advanced their claims on two bases: (1) a contractual entitlement under their terms and conditions; and (2) a claim under the Working Time Directive to be paid "normal remuneration". (As the Trust was an emanation of the State, the claimants could rely on the Working Time Directive rather than the Working Time Regulations on which private sector employees would need to rely.)

Employment tribunal decision

The ET held that the claimants' contractual terms and conditions entitled them to have non-guaranteed overtime taken into account when calculating holiday pay but not voluntary overtime. This was because shift overrun work was a contractual obligation, whereas there was no contractual obligation on employees to carry out voluntary overtime.

As regards the claim under the Working Time Directive, the Trust conceded that, in the light of the Employment Appeal Tribunal (EAT) decision in Bear Scotland Ltd v Fulton [2015] ICR 221, non-guaranteed overtime should be taken into account. The ET, however, accepted the Trust's argument that voluntary overtime was in a different category and, following the case of British Airways plc v Williams [2012] ICR 847, that the voluntary overtime did not form part of an employee's "normal remuneration".

The claimants appealed against the finding that voluntary overtime was not to be taken into account either pursuant to their contractual terms or under the Working Time Directive. The Trust cross-appealed against the finding that there was a contractual right for non-guaranteed overtime to be taken into account.

Employment Appeal Tribunal decision

As regards the appeal in respect of the Working Time Directive claim, since the ET's decision, the EAT had handed down its judgment in Dudley Metropolitan Borough Council v Willetts [2018] ICR 31 in which it was held that payments for voluntary overtime fell within the concept of "normal remuneration" where such overtime was carried out over a sufficient period of time on a regular and/or recurring basis to justify the description "normal".

The Trust argued that the EAT in Dudley had wrongly interpreted European Court of Justice case law and accordingly the decision should not be followed and that, in any event, the present case could be distinguished from Dudley on its facts. The EAT did not accept either of these arguments.

The EAT therefore remitted the claims for a case by case assessment as to whether each claimant had a pattern that was sufficiently regular and settled to be taken into account in the calculation of normal remuneration.

As regards the appeal and cross-appeal on the contractual claim, the Trust argued that, under the contract, components of holiday pay were basic pay and regularly paid supplements and that, as overtime was not a "supplement" and was not "regularly paid", neither non-guaranteed overtime nor voluntary overtime fell within the contractual provision. The EAT found no basis to distinguish between the two types of overtime payments. The purpose of the clause was to calculate holiday pay on the basis of what the employee would have been paid if at work and held that both non-guaranteed and voluntary overtime fell within the category of "pay". As such, holiday pay should include payments in respect of both types of overtime in the previous three month period or other locally agreed reference period in accordance with the terms of the claimants' contracts of employment.

Comment 

This case is a useful reminder that payments for voluntary aspects of work should be included in holiday pay calculations for Working Time Directive holiday (ie four weeks per year) if they are paid regularly or repeatedly over a sufficient period of time to amount to normal remuneration.

The findings in respect of the contractual claim, however, have wider implications as they are not limited to Working Time Directive holiday and will apply to all holiday entitlement under the claimants' contracts (and to all employees employed on the same NHS terms as the claimants). They also do not require the same regularity as is required for overtime payments to be part of "normal remuneration" for the purposes of a Working Time Directive/Working Time Regulations claim.

An application for leave to appeal to the Court of Appeal has been made. In the meantime, although this case concerned NHS terms, employers may wish to review their own contractual holiday provisions to identify whether the wording might create a similar contractual entitlement to the one in this case.