Dudley Metropolitan Borough Council v Willetts and ors
The Employment Appeal Tribunal (EAT) upheld a tribunal's decision that regular payments for voluntary overtime should be taken into account when calculating employee's holiday pay.
In this case, 56 employees who were 'Quick Response Operatives' (plumbers, roofers and similar tradesmen) working for the Council worked entirely voluntary overtime which paid additional standby and call-out allowances.
The employees therefore contended that their holiday pay should reflect voluntary overtime, call-out payments and mileage and standby allowances.
The Employment Tribunal's Decision
The ET took into account Article 7 of the EU Working Time Directive (No.2003/88) and the Working Time Regulations 1998. It concluded that the allowances should be included in most of the Claimants' statutory holiday pay for the four weeks' minimum leave required by the Directive.
The ET found that although participation in the standby rota was voluntary, once an employees' name was on the rota, he or she was required to attend work if called upon, and the call-out payment was intended to reimburse him or her for the inconvenience of undertaking our of hours work.
The Tribunal took into account the principle in Williams that workers should not be deterred from taking annual leave. The ET also took into account the test in Bear Scotland Ltd v Fulton and anor in that 'normal pay' is that which is 'normally received' (as part of normal remuneration).
The Council, relying on Williams and Lock, argued that the overtime payments were not 'normal remuneration' because they lacked an intrinsic link to the performance of tasks required under the employment contract.
The EAT rejected the Council's argument.
For remuneration to be considered as 'normal', it must have been paid over a sufficient period of time. What counts as sufficient is yet to be defined, although it will most likely be a question of fact and degree.
The EAT stated that to exclude such payments from holiday pay would result in a financial disadvantage to workers which will inevitably deter (or might deter) workers taking annual leave.
On the subject of the employment contracts, the EAT was of the view that as soon as the Claimants began working a shift of voluntary overtime or a period of standby duty or call-out, they were performing tasks required of them under their contracts of employment even though there was also a separate agreement or arrangement.
The decision from the ET & EAT is rather interesting. In the ET's words, it is certainly "sailing into unchartered waters". How will this affect employers whose employees, by the nature of their roles, are inevitably going to be working overtime?
It seems that the courts are more willing to examine the financial reality of the employee when faced with booking a holiday and ask the question on their behalf, 'will the employee receive their normal pay while on leave?'. We should encourage all employers with any part of their workforce working overtime to examine the basis on which this is done and the frequency. Unless overtime is worked randomly or infrequently, there will be a risk that it is caught by the latest decision.
We at Hedges (firstname.lastname@example.org / email@example.com) would be more than happy to discuss any existing arrangement business owners/employers have with their workers, and advise on potential liability.