3rd August 2017

The Employment Appeals Tribunal has now ruled that employees who regularly work voluntary overtime beyond their contracted hours may now have those payments included in their holiday pay for the first four weeks' paid holiday [Dudley Metropolitan Borough Council v Willets].

The Claimants comprised 56 employees who were responsible for the repair and maintenance of council houses. They were employed by the council as 'Quick Response Operatives' and included roofers, plumber and electricians. They usually worked 37 hours a week in their own day jobs. They were also on a register as a 'Quick Response Operative' and worked voluntary overtime, for which they were paid additional standby and callout sums. They were essentially voluntarily 'on call' workers. However these voluntary payments were excluded from their holiday pay.

The workers stated that this was contrary to the Working Time Regulations 1988, saying that they were entitled to receive pay for these voluntary addition duties, along with the travel time linked to this work. They argued that these payments should have been taken into consideration for the calculation of holiday pay, to ensure that they were not financially disadvantaged by taking leave.

The respondents, Dudley Council stated that the overtime payments were not considered 'normal remuneration' and relied on previous case law. They stated that the 'on call' aspect lacked a crucial link to the actual performance of tasks which were outlined and required in the employment contract.

The Employment Appeals Tribunal rejected this narrow interpretation. They found that excluding these payments from holiday pay resulted in a financial disadvantage to workers which might deter them from taking holidays. It found that that there was a link between these payments and the performance of the duties, as, when the individuals were working overtime, the operatives were performing the same tasks as stipulated under their contracts. Annual leave and holiday pay was a pillar of EU social law and therefore crucial to uphold and protect.

The Employment Appeals Tribunal relied on case law which emphasised that workers should in fact receive their 'normal remuneration' when they take a holiday. The EAT found that holiday pay must link to normal payments. What is normally paid is what should be normally received. What is normal pay can be ascertained from that which is paid over a particular period of time. It is unlikely that this decision will expose employers to backdated claims for voluntary overtime. Employees who have a break of more than three months between payments will not be able to argue that they have suffered from a series of unlawful deductions.

WJM's employment team says that it is important that you review your holiday pay to employees, to find out if there are any payments being made for voluntary overtime which are not currently being calculated as part of holiday pay.

If you require any help or advice as a result of this development, please contact one of our Employment team:

Liam Entwistle:  lae@wjm.co.uk

Martin Stephen: mss@wjm.co.uk

Andrew Wilson: ajpw@wjm.co.uk

John Grant:        jzg@wjm.co.uk

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