Flowers and others v East of England Ambulance Trust - Court of Appeal

This is an area of the law that has been subject to a significant amount of analysis and legal challenge since the landmark case of Bear Scotland v Fulton and another in 2014 (and the often forgotten joined cases of Hertel (UK) Ltd v Woods and Amec Group Ltd v Law). 

The Bear Scotland case (which had previously been known as 'the Freightliner case') ruled that workers and employees must receive their 'normal' remuneration whilst they are on holiday to ensure that the principles of the Working Time Regulations 1998 (and the European Working Time Directive which the regulations implement) provide an environment where individuals are not financially disadvantaged simply by taking their statutory holiday.  Of course, the underlying purpose of this is health and safety (and wellbeing) of workers and employees.

Voluntary overtime. Is it included in holiday pay?

There has been much discussion in businesses, HR circles and in Employment Tribunals about whether there is a distinction to be made between contractually required, contractually guaranteed and voluntarily overtime.  A number of businesses took an approach that such a distinction could and should be made and accordingly only included overtime in their holiday pay calculations in circumstances where there was a positive contractual obligation on their employees/workers to work the overtime.  

This is not an approach that we ever thought would be successful, albeit that a number of large employers had taken such an approach.  Yes, you are right - I am just about to get to the "I told you so" part of the article!

The first significant case of note which challenged the making of such distinctions - and accordingly the exclusion of voluntarily worked overtime from any calculation of holiday pay - was the case of Dudley Metropolitan Borough Council v Willetts and others (2017).  This case concerned voluntary overtime, standby and call out payments.  

The noteworthy point made in this case was that there was an "overarching principle" that holiday pay must equal "normal remuneration".  

This case was followed by Flowers and others v East of England Ambulance Trust in the Employment Appeal Tribunal.  In this instance the judge ruled that:

23.  The argument that an employee's agreement to carry out specified hours of voluntary overtime for reward gives rise to no contractual obligation is, in my judgment, untenable. As to the agreed facts and the evidence of Mr Sharp, these do not affect the question of whether a particular Claimant employee in fact had a pattern of voluntary overtime which was sufficiently regular and settled to be taken into account in the calculation of normal remuneration.

This was appealed to the Court of Appeal by EofE Ambulance Trust.  The appeal upheld the decision of the EAT, namely that voluntary overtime is to be included in the calculation of holiday pay in circumstances where there is a settled and regular pattern.  If there is such a regular pattern it follows that this needs to be reflected in the employee/worker's pay during holiday given that the requirement for holiday pay to be compliant with European law is for that remuneration to be normal.

It also follows that if the overtime (whether contractual or voluntary) is so exceptional and unforeseeable that it would not be normal and accordingly may not appropriate for inclusion in holiday pay.  Of course, we will need to wait for further cases to go through the courts if we are to obtain any guidance on what the meaning of exceptional and unforeseeable actually is. 

Don't forget.

This only applies to the 4 weeks of holiday as provided for under the Working Time Directive.  It does not apply to the additional 1.6 weeks that the UK has given employees and workers in annual leave.  Businesses therefore remain entitled to draw this distinction (the 4 week vs 5.6 week distinction) and pay basic rates of pay during this 'additional' 1.6 weeks under UK law if they so wish, although such distinctions do not appear to be very commonly used in practice given the complexity of such a system.

Guidance.

If you require any advice or guidance on the implementation of holiday pay calculations, the risks and potential liabilities that your business may have or simply want to quickly check your current procedures then please email me at matthew.huggett@carbonlawpartners.com

10 June 2019