The Court of Appeal has, this week, issued a landmark judgment which will be of interest to employers and their advisers concerning the vexed question of overtime and holiday pay calculations. The case in question was brought by a group of NHS employees, lead by Neil Flowers, against East of England Ambulance Service NHS Trust in which they argued, with the support of their Union, UNISON, that their holiday pay should better reflect the hours they actually worked, rather than be based solely on their contracted hours. The paramedics undertook two types of overtime non-guaranteed overtime and voluntary overtime. Non-guaranteed overtime arose when, at the end of their shift, they were in the middle of a task that had to be seen through to completion. Voluntary overtime arose when they volunteered to work additional shifts. In each case, the employee received an additional payment which was not taken into account when it came to calculating their holiday pay.
The Court of Appeal has provided definitive confirmation that voluntary overtime payments, if routinely earned over a period of time, should form part of the calculation for holiday pay. This is to be distinguished from voluntary overtime which is exceptional and unforeseen. Only in the latter case should the overtime payments be viewed as not forming part of the normal remuneration that the employee can expect to receive as part of their holiday pay. [Here’s a link to the full Judgment: https://www.bailii.org/ew/cases/EWCA/Civ/2019/947.html]
While the ruling will undoubtedly have a major impact and benefit thousands of NHS staff employed under the Agenda for Change, the ripple effect is likely to be much broader than just the NHS. As ever, cases will turn on their own facts, but the Court of Appeal has given the clearest indication yet to employers that payments received in respect of voluntary overtime, if regular and extending over a period, do form part of an employee’s normal remuneration and so should be included as part of their holiday pay calculation so far as their statutory leave entitlement is concerned.
It is not a surprising decision and we know that many of our employer clients have already put measures into effect in anticipation of a ruling of this nature. However, if you’re still to make changes to your systems and processes or would like to know more about how you can mitigate your exposure to potential claims for unlawful deductions from wages, please get in touch with Emma or Tiggy or another member of the Torque Law team.