The Court of Appeal has upheld the Employment Appeal Tribunal (EAT) decision in Flowers v East of England Ambulance Trust. It has confirmed that voluntary overtime should be included in the first four weeks holiday pay so long as such payments are sufficiently regular and settled enough to amount to "normal" pay.
Facts and background
In Flowers, the Claimants were all employed by the Trust in a range of roles providing ambulance services. The Claimants argued the calculation of their holiday pay should take account of (a) non-guaranteed overtime and (b) voluntary overtime. Following previous case law the respondent Trust conceded the claim on non-guaranteed overtime, so the case centered on voluntary overtime.
The claimants brought their claim firstly under the contractual provisions in Agenda for Change (AfC) and secondly under the Working Time Directive (WTD).
At the EAT stage the court followed the EAT decision in Dudley Metropolitan Council v Willetts which looked at the obligation to pay voluntary overtime under the Working Time Regulations (WTR) . In Dudley, the EAT ruled that voluntary overtime should be included in the first four weeks holiday pay where such payments are "regular enough" to amount to "normal" pay.
The EAT decision also went beyond this and also gave a contractual right to employees under AfC, not just a statutory one under the WTR.
The respondents appealed to the Court of Appeal.
Court of Appeal decision
The Court of Appeal was clear that AfC required a wide range of payments to be included in the holiday pay calculation.
The Court also went on to approve the decision in Willetts that regular voluntary overtime should be included in WTD holiday pay.
In between the EAT decision and the Court of Appeal hearing in Flowers, the European Court of Justice (CJEU) made observations in a German case of Hein v Albert Holzkamm GmbH & Co, which appeared to cast doubt on the support Willetts and Flowers give to a general proposition in favour of including voluntary overtime in holiday pay calculations. The CJEU's judgment suggested that employers might not have to factor pay for overtime into holiday pay calculations unless the worker is contractually obliged to work overtime.
The Court of Appeal found the CJEU's judgment both surprising and self-contradictory, and decided that it cannot have been the intention of the CJEU to "perform a handbrake turn" on preceding case law. Accordingly, the Court concluded that, by referring to a contractual requirement, the CJEU was merely seeking to draw a distinction between "exceptional and unforeseeable overtime payments" on the one hand and "broadly regular and predictable ones" on the other (the later should be included in normal pay, the former should not).
What does this mean for employers?
This is an unsurprising decision. We thought a chink had been created by Hein but the door has now been firmly shut by the Court of Appeal.
Unless there is a further surprising decision from the CJEU, or a successful appeal by the Trust respondent in Flowers, the core battleground on overtime holiday pay will remain centered around regularity and predictability. As is the case now, not all voluntary or non-guaranteed contractual overtime will need to be included in holiday pay. What is "regular enough" is a question of fact in each case. So, if a person works overtime irregularly, for example, where there is no predictable pattern to it or there are big gaps between the overtime working, then employers can still argue that it is not a regular payment which should be included in holiday pay.
It is possible the respondent may apply for permission to appeal. We will, of course, monitor this case and keep you informed
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