East of England Ambulance Service NHS Trust v Flowers and Others (EWCA)
The Court of Appeal has confirmed that entirely voluntary overtime payments should be factored into the calculation of holiday pay where they are made with sufficient regularity to justify the label of "normal" remuneration.
Employees of the ambulance trust worked irregular overtime which was classified as either: (i) non-guaranteed shift-overrun periods, to do mandatory work that exceeded the end of a scheduled shift (e.g. completing a call made to emergency services); and (ii) genuinely voluntary overtime for which they signed up of their own accord. The employees considered that their holiday pay should factor in such overtime payments, relying in part on their contracts, which stated that holiday pay would include "regularly paid supplements… including payments for work outside normal hours" because it reflected their usual pay, when calculated over a 3 month reference period. They advanced claims for unlawful deductions of holiday pay on the basis of both this contractual wording and their general right to receive "normal remuneration" whilst on holiday under the Working Time Directive (“WTD”), as interpreted under EU and UK case law.
The Tribunal at first instance distinguished between the two types of overtime, holding that whilst non-guaranteed shift-overrun payments should form part of "normal remuneration" under both the relevant contractual provision and the WTD, whether or not an individual worked voluntary overtime was at their absolute discretion and so should not be included when calculating holiday pay. On appeal against the latter conclusion, the EAT disagreed. It held that previous case law had clearly established that voluntary overtime payments should be factored into holiday pay calculations where it was carried out over a sufficient period of time on a regular and/or recurring basis so as to justify the description "normal". The CA has now agreed with the EAT's analysis, confirming that to the extent genuinely voluntary overtime work is "sufficiently regular and settled" so that payments made for that overtime can be legitimately classified as "normal remuneration", it should be incorporated into any holiday pay calculation.
This case has re-emphasised that when assessing holiday pay, an employer should focus on an employee’s regular remuneration in fact, regardless of whether elements of such remuneration relate to voluntary or non-contractual overtime. This will be a question of degree, requiring case by case assessments of whether particular remuneration is paid consistently enough to warrant the label of "regular".