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The Court of Appeal has this week ruled that employers must consider any ‘regular’ voluntary overtime when calculating holiday pay, in addition to ‘non-guaranteed’ overtime, upholding the earlier decision of the Employment Appeal Tribunal (EAT).

In Flowers and others v East of England Ambulance Service NHS Trust (2017) the Claimants, all employed by the East of England Ambulance Service NHS Trust (in a variety of roles) initially brought their claim to the Bury St Edmunds Employment Tribunal alleging that unlawful deductions had been made from their holiday pay.

They stated that the calculation of their holiday pay should account for overtime in two categories – non-guaranteed overtime, and voluntary overtime.  The difference between the two in this case is that non-guaranteed overtime occurs when the employee is carrying out a task which must be completed after the end of the shift (for example dealing with an emergency services call for an ambulance), whereas voluntary overtime would be classed as additional shifts which the Claimant can choose to volunteer for (there was no requirement or expectation for them to do so however).

The Employment Tribunal initially held that the Claimant’s terms and conditions gave them an entitlement to have non-guaranteed overtime included in their holiday pay, but not voluntary overtime.  The Claimants subsequently appealed to the EAT that voluntary overtime should be taken into account, whereas the Trust cross-appealed against the original judgment that non-guaranteed overtime should be taken into account.  The EAT held that the Claimants appeal should be allowed (albeit referring individual claims back to the Employment Tribunal for a case-by-case assessment) and the Trust’s cross-appeal dismissed.

The Trust appealed to the Court of Appeal and in a decision handed down earlier this week (10th June), it was decided that voluntary, additional shifts, should be included in the holiday pay calculation if they were regular enough. 

In making his judgment, Lord Justice Bean referred to the Annual Leave and General Public Holidays section of the Trust’s Terms and Conditions Service Handbook (known as the “Agenda for Change” agreement) which states:

“Pay during annual leave will include regularly paid supplements, including any recruitment and retention premia, payment for work outside normal hours and high cost area supplements.  Pay is calculated on the basis of what the individual would have received if he or she had been at work.  This would be based on the previous three months at work or any other reference period that may be locally agreed”.

He rejected the Trust’s argument that the omission from the above clause of an express reference to overtime shows a deliberate decision by the employer that it should be excluded from holiday pay calculations, as “to do so would result in many cases in annual leave payments which fall well short of being a calculation of pay “on the basis of what the individual would have received had he/she been at work””.  He further agreed with the EAT’s interpretation of the clause that overtime is part of pay – the clause ‘must be read as a whole’, and that there was no basis for distinguishing between voluntary and non-guaranteed overtime.

It should be noted that the above mentioned section of the decision dealt with the contractual claim for holiday pay, i.e. a claim brought on the basis of what was stated in the employee’s terms and conditions of employment.  An alternative claim for overtime was also initially brought under Article 7 of the Working Time Directive (this stipulates a minimum period of at least four weeks of paid annual leave (and that this must not be replaced with an allowance in lieu), however does not specify the amount of pay to be received during a period of annual leave) and although strictly speaking this need not have been considered as the NHS employees had already been successful under the ‘contractual’ part of the claim, the Court of Appeal felt it important to be addressed as it would have implications for employees ‘throughout the workforce not limited to the NHS’.

Considering the judgment of the Court of Justice of the European Union (CJEU) in the earlier case of Hein v Albert Holzkamm GmbH (13 December 2018, case C-385/17), Lord Justice Bean also rejected the Trust’s appeal on the Working Time Directive issue, concluding that in the case of Hein the CJEU were actually saying that there was a difference between voluntary overtime which was ‘sufficiently regular and settled’ which should be included, and overtime which was ‘exceptional and unforeseeable’ which should not.

In his judgment he stated that the question in each case is essentially whether the pattern of work in question is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration – there is no additional requirement that hours of work are compulsory under the worker’s contract.

The key point for employers to take into account here is that the both the wording of overtime and holiday clauses in employee’s terms and conditions of employment, and what actually happens in practice, are equally important when calculating holiday pay.