First Court of Appeal ruling on voluntary overtime: it must be included in holiday pay

The Court of Appeal ruling in Flowers v East of England Ambulance Trust has been much anticipated by employers as it is the first holiday pay case to reach this level of the English judicial system. The employer had appealed an EAT ruling that found in favour of the paramedics who had argued that all voluntary overtime should be included in their holiday pay. The Trust’s appeal was based on a distinction between different types of voluntary overtime: shift overruns and additional voluntary shifts. The employer accepted that shift overruns (where the paramedics had to continue working if they were involved in an emergency call at the end of their shift should be included in the calculation of holiday pay, but did not agree that where they had taken on additional shifts that these should also be included. The Court of Appeal was asked to consider both the paramedics’ contracts in respect to holiday pay and the requirement of the Working Time Directive (WTD) to pay normal remuneration during annual leave. The judge felt that both the contract and the WTD required all voluntary overtime to be included in holiday pay.

The judge reinforced the view taken in Dudley MBC v Willets [2018] ICR 31, and in fact right back to the Williams and others v British Airways plc (Case C-155/10) in 2012 that, ‘pay that is intrinsically linked to the performance of the tasks which the worker is required to carry out’ is to be classed as ‘normal remuneration’ which is the definition of the pay that must be received when an employee is on paid annual leave – not ‘contractual remuneration’ which could be taken to be just basic pay.  To receive anything less than normal remuneration would be a disincentive to take paid holiday so would defeat the intention of the EU WTD that statutory leave is primarily a health and safety measure to give employees time away from work. Lord Justice Benn ruled that there was no distinction in the two types of overtime and that as both could be paid on a ‘regular and settled ‘ basis they fell to be treated as remuneration.

It’s worth summarising the progress of the arguments about holiday pay in the UK and European courts. The CJEU considered the amount of holiday pay three times between 2006 and 2014 based on cases referred to it by the UK courts. This was necessary as the WTD only specifies that 4 weeks’ paid leave shall be given, not what elements make up ‘pay’.

  • In the British Airways case, the pilots won their case that flying and time away from base supplements were part of their normal remuneration
  • In Lock v British Gas commission was to be includes, and
  • In Robinson-Steele v RD Retail Services the concept of rolled up holiday pay not being compatible with the WTD was explored and BEIS subsequently decided that it was unlawful

Much of the ruling was taken up with considering a controversial recent preliminary ruling by the CJEU in the case of  Hein v Albert Holzkamm GmbH (C-385/17 13 December 2018) where the Advocate General said (in para 46 of his ruling) that all overtime payments were ‘exceptional and unforeseeable’ so should not be included. Lord Justice Benn gave this view short shrift with the following comment: ‘The CJEU is notorious for making pronouncements resembling those of the Oracle at Delphi, but even by their oracular standards paragraph 46 is hard to understand’. On that basis he felt the Advocate General had made a mistake in the ruling and had meant to say some overtime might be excluded if it was exceptional and unforeseeable, but that regularly performed overtime should not.

So following ACAS’ guidance it is now clear that voluntary overtime should be added to the list of pay elements that are to be included in holiday pay as long as the overtime is of a ‘regular and settled’ nature. Remember in the Willets case regular was considered to be only once a month.