Voluntary overtime may be taken into account when calculating holiday pay

East of England Ambulance Trust v Flowers

Voluntary overtime should be factored into the calculation of holiday as long as it is it is sufficiently regular and settled so that payments for overtime amount to ‘normal’ remuneration says the Court of Appeal.

Background

Various members of ambulance crews had clauses in their contracts relating to ‘non-guaranteed overtime’ (which was mandatory but irregular) and ‘voluntary’ overtime (which was wholly voluntary and also irregular). Each member of staff had varying levels of each type of overtime.

Mr Flowers and his colleagues claimed that both types of overtime should be included in their holiday pay calculations based on the wording of the collectively agreed contract.

The tribunal held that the non-guaranteed overtime should be included in the holiday pay calculation, but that purely voluntary overtime should not.

On appeal, the EAT, following Dudley MBC v Willets held that despite any interpretation of the contract, voluntary overtime was part of ‘normal remuneration’ if it was paid over a ‘sufficient period of time’ on a regular and/or recurring basis– and this was a matter of fact for a tribunal to decide.

The trust appealed, arguing that the Dudley case was wrongly decided, following the decision of the European Court of Justice (ECJ) in December 2018 in Hein v Albert Holzkamm GmbH. In that decision the ECJ said:

‘46. Lastly, as for the rule that overtime worked by the worker is to be taken into account for the purpose of calculating the remuneration due in respect of paid annual leave entitlement, it should be noted that, given its exceptional and unforeseeable nature, remuneration received for overtime does not, in principle, form part of the normal remuneration that the worker may claim in respect of the paid annual leave provided for in Article 7(1) of Directive 2003/88’.

Court of Appeal decision

The appeal was dismissed.

The Court of Appeal found that on a strict contractual basis the claimants were entitled to have voluntary overtime included in their holiday pay. Therefore they won. But the court felt it was important to go on and consider the position under the Working Time Regulations/Directive as this clearly affected a lot of other workers.

The Court of Appeal was clearly perplexed by the Hein judgment, even sending the advocates off to double check that it was the correct translation from the original language of the judgment which had been German. They commented that ‘The [ECJ] is notorious for making pronouncements resembling those of the oracle at Delphi, but even by their oracular standards paragraph 46 is hard to understand’.

After much legal argument and noting that on the face of it the Hein case appeared to fly in the face of all previous cases and the direction of travel for holiday pay, they accepted that the ECJ was making a distinction between ‘exceptional and unforeseeable overtime payments on the one hand and broadly regular and predictable ones on the other’.

The Court of Appeal agreed with the EAT and said that provided the overtime was sufficiently regular and settled for payments made in respect of it to amount to ‘normal’ remuneration then it should be included.

Although they could have made a reference to the ECJ they pointed out that:

• the claimants had won anyway on the interpretation of the contract so what was the point, and
• we were leaving the EU soon anyway, so what was the point

Link to judgment: https://www.bailii.org/ew/cases/EWCA/Civ/2019/947.html

Comment

It is perhaps a shame that the Court of Appeal did not refer this to the ECJ to allow them to clarify their seemingly bizarre comments in the Hein judgment as this potentially opens the way for the trust, at public expense, to take the matter to the Supreme Court. The Court of Appeal’s optimism about leaving the EU soon may not be well founded based on history to date.

This case is not authority to say that all voluntary overtime must be included in holiday pay calculations but only that which is ‘sufficiently regular and settled’ as opposed to those payments that are ‘exceptional and unforeseeable’. No doubt there will be numerous cases on exactly what is meant by this.