The Employment Appeal Tribunal have this morning confirmed that voluntary overtime should form part of workers holiday pay.
The case, Dudley Metropolitan Borough Council v Mr G Willetts and Others, will come as a blow to employers throughout the UK and comes hot on the heels of the Supreme Court decision on scrapping Employment Tribunal fees which was handed down last week.
In order to understand the judgment fully, it’s useful to understand the various types of overtime, as recognised by case law, and what they mean.
In summary, Courts and Tribunals recognise three different types of overtime:
- Guaranteed overtime – overtime which is guaranteed by the employer and which must be worked by the employee;
- Non-guaranteed overtime - overtime which does not have to be offered by the employer but if offered must be worked by the employee; and
- Voluntary overtime - overtime which the employer is not obliged to provide and the employee is not obliged to work.
It’s been accepted for a while that guaranteed overtime should be paid as part of holiday pay. The confusion surrounding non-guaranteed overtime was cleared up in the 2014 case of Bear Scotland v Fulton which ruled that such payments should also be included with the calculation of holiday pay. This left us in a position where only voluntary overtime (the most common form of overtime) required tribunal clarification. That has been clarified today.
This morning’s judgment relies on European law in the Working Time Directive and confirms that voluntary overtime classes as “normal remuneration” and is therefore payable to workers. The key finding by the EAT was that failure to pay such overtime would put a worker at a financial disadvantage by taking annual leave and may deter a worker from taking such leave.
So what is “normal remuneration”? Whilst not going into great detail, the EAT states that to be payable, any voluntary overtime must have been worked over a sufficient period of time and/or on a recurring basis which “will be a question of fact and degree” in each case. BPE have had sight of cases where a 5 week gap in overtime has classed as “normal”.
For those who have been following BPE’s bulletins and attended our CIPD events (including our review of the original decision in Employment Tribunal decision in 2016) we gazed into our crystal ball as far back as 2014 and predicted the outcome of this judgment and encouraged employers to prepare for this day.
These notes have been prepared for the purpose of an article only. They should not be regarded as a substitute for taking legal advice.