1 August 2017

EAT confirms that pay for voluntary overtime does count towards Working Time Directive holiday pay

Since the EAT gave its judgment in BEAR Scotland in 2014, employers have clung to the hope that pay for voluntary overtime might not count in the calculation of holiday pay granted by the Working Time Directive. BEAR Scotland only dealt with overtime that was either guaranteed (so that it hardly looked like “overtime” at all) or that could not be refused by the employee.

The hope that voluntary overtime was somehow not covered was based on the mantra, repeated in a succession of ECJ cases, which seemed to set out a requirement that, for pay to count, it had to be for work that was intrinsically linked to the performance of work required under the contract of employment. Could employers argue that voluntary overtime, in all its various forms, was not “required” under the contract of employment?

“No”, says the EAT’s President in her judgment in Dudley MBC v Willetts & Ors UKEAT0334/16. That mantra was not meant to limit the scope of “normal pay”. To be “normal”, an element of pay must have been paid over a sufficient period of time. That still leaves some uncertainty in cases where the “regularity” with which additional work is carried out is live.

In Dudley v Willetts a number of different kinds of additional pay were under scrutiny. Whilst all of them were found to be capable of leading to part of an employee’s “normal pay”, it is still a matter for the Employment Tribunal to make findings of fact about whether they had actually become “normal”. The EAT also confirmed that there might be some situations where an employee could not show any loss of holiday pay. In the Dudley case one type of extra payment was for being on a standby rota every few weeks. Employees took their holidays to fit in with those standby duties, leaving the possibility at least that they have suffered no recoverable loss of holiday pay.

It is also important to note that Dudley v Willetts still only applies to the four weeks of holiday taken under Regulation 13 of the Working Time Regulations (the holiday granted by the EU Directive on which the UK Regulations are based). The additional holiday granted by Regulation 13A and any contractual holiday on top of that are unaffected. That still leaves the potential for three-month gaps between Regulation 13 holiday in one holiday year and the next, which in turn will make it difficult for claimants to make claims for more than one holiday year at a time.

Michael Stokes was instructed by Dudley MBC in this case.

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Michael Stokes, Partner
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