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Court of Appeal rules that voluntary overtime must be included in holiday pay

This report relates to 1 case(s)

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    East of England Ambulance Service NHS Trust v Flowers and others [2019] IRLR 798 CA (0 other reports)

East of England Ambulance Service NHS Trust v Flowers and others [2019] IRLR 798 CA

annual leave | holiday pay | voluntary overtime

In East of England Ambulance NHS Trust v Flowers and others, the Court of Appeal held that ambulance workers are contractually entitled to have voluntary overtime included in the calculation of their holiday pay and, under the Working Time Directive (2003/88/EC), to have it included where it is sufficiently regular and settled.

Implications for employers

While each case will turn on its own facts, employers that offer voluntary overtime will need to consider if they offer their employees a pattern of voluntary overtime that is sufficiently regular and settled to form part of the calculation of holiday pay.

The judgment will not be welcomed by NHS employers as it confirms that employees have a contractual entitlement to have voluntary overtime taken into account for the purposes of calculating holiday pay under NHS terms and conditions.

A group of ambulance workers brought claims in the employment tribunal for unlawful deductions from wages. They argued that their NHS contractual terms and conditions entitle them to have non-guaranteed overtime (ie overtime that they are required to do when shifts overrun) and voluntary overtime taken into account in the calculation of their holiday pay.

As the NHS trust is an emanation of the state, they also brought their claim under art.7 of the Working Time Directive rather than under the Working Time Regulations 1998, which implement the terms of the Directive.

By the tribunal hearing, the trust had conceded that, in light of the EAT decision in Bear Scotland Ltd and others v Fulton and others; Hertel (UK) Ltd v Woods and others; Amec Group Ltd v Law and others [2015] IRLR 15 EAT, pay for non-guaranteed overtime must be taken into account when calculating the ambulance workers' holiday pay under the Working Time Directive. However, the trust did not accept that this is the case with voluntary overtime.

The tribunal agreed with the trust. The tribunal found that voluntary overtime is in a different category under their contracts of employment and the working time legislation. The tribunal held that that there is no contractual obligation for the ambulance workers to perform voluntary overtime, and therefore pay for voluntary overtime does not form part of the ambulance workers' "normal remuneration" and should not be taken into account in the calculation of their holiday pay.

The ambulance workers appealed to the Employment Appeal Tribunal (EAT). They relied on Dudley Metropolitan Borough Council v Willetts [2017] IRLR 870 EAT and argued that voluntary overtime should be included (under both their contractual terms and the Working Time Directive) in the calculation of their holiday pay.

The EAT found that the NHS terms and conditions require voluntary overtime, as well as non-guaranteed overtime, to be included in the calculation of holiday pay, whether it is regular or not.

Turning to the claim under the Working Time Directive, the EAT found that the decision in Dudley was "clearly right". The EAT said that, after identifying the central propositions, Dudley had found that the exclusion of payments for voluntary work that is normally undertaken would offend the overarching principle (ie holiday payments must correspond to the normal remuneration received by the worker) and would give rise to the real risk of pay structures being fragmented to minimise levels of holiday pay. While acknowledging that, at the time of its judgment, the tribunal did not have the benefit of the decision in Dudley, the EAT held that it had been wrong to hold that voluntary overtime necessarily falls outside the calculation of annual leave under the Working Time Directive.

The trust appealed to the Court of Appeal.

The Court of Appeal began by looking at the NHS terms concerning annual leave. The Court rejected the trust's argument that the omission of an express reference to overtime represents "a deliberate decision" by the parties that it should be excluded from the calculation of holiday pay. The Court said that the clause must be read as a whole and the natural interpretation is that overtime is part of pay.

Having found that the ambulance workers have a contractual entitlement to have voluntary overtime included in holiday pay, the Court said that it was not necessary "in the strict sense" to consider the claim under the Working Time Directive. However, it proceeded to do so because it said the issue has implications for employees throughout the workforce, not just the NHS.

The Court of Appeal reviewed Williams and others v British Airways plc [2011] IRLR 948 ECJ, Bear Scotland, Dudley and Lock v British Gas Trading Ltd [2014] IRLR 648 ECJ. The Court found that ECJ case law establishes clearly that the question in each case is whether or not the pattern of work is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration. There is no separate requirement that the hours of work are compulsory under the contract. After struggling to decipher Hein v Albert Holzkamm GmbH C-385/17 ECJ, the Court concluded that the ECJ had not intended "to perform a handbrake turn" and contradict so much of what it had previously said.

The Court of Appeal held that Dudley had been correctly decided and that there were no errors in the EAT's approach.

The Court of Appeal dismissed the trust's appeal.

Case transcript of East of England Ambulance NHS Trust v Flowers and others