HOLIDAY FUN IN THE SUN – BUT NOT FOR THOSE WHO HAVE TO CALCULATE HOLIDAY PAY

As the sun comes out and holiday season approaches, there are new headaches for employers when it comes to calculating holiday pay

We have now had the first two reported Employment Tribunal decisions on how voluntary overtime and stand-by payments should be treated for the purposes of holiday pay.  White & Others v Dudley Metropolitan Borough Council and Whitehead & Others v EMH Housing Regeneration Limited apply the principles laid down in the Bear Scotland holiday pay case to voluntary overtime and stand-by shift payments.

Readers of our blog (www.devonshiresemployment.com) will be familiar with the Bear Scotland case, which stated that holiday pay should not just be calculated upon basic salary but should take account of “normal remuneration” for the EU-derived entitlement of 4 weeks of annual leave.  “Normal remuneration” was deemed to include payments for guaranteed overtime and also non-guaranteed overtime (i.e. that which the employer is not obliged to offer but which the employee must do if asked) if sufficiently regular.

Purely voluntary overtime was not at issue in Bear Scotland.  It did form part of the facts in the Northern Ireland case of Castlereagh Borough Council v Patterson, where the Northern Ireland Court of Appeal decided that there was no reason in principle why payments for voluntary overtime should not be reflected in holiday pay if they were earned sufficiently regularly.  However Northern Ireland cases are not binding on courts and tribunals in England and Wales.

White & Others v Dudley Metropolitan Borough Council involved operatives working on the Council’s stock of social housing.  They could volunteer to work on Saturdays and to participate in a standby rota for emergency call-outs and repairs.  They received additional payments for such work and some also received a mileage allowance (which was higher than the cost of the actual trip).  The Council argued that additional payments for voluntary work such as this could not be regarded as being payments which were intrinsically linked to the performance of tasks which a worker was required to carry out under their contract of employment (emphasis added), such that they should be reflected in holiday pay.  The Employment Tribunal Judge disagreed, holding that the fact that this work was voluntary was not relevant to deciding whether it should be factored into holiday pay or not; what mattered was whether the payments were received with sufficient regularity.  The case of each operative would need to be considered individually to see if the regularity threshold was met or not.

In Whitehead & Others v EMH Housing Regeneration Limited, the disputed payments were for voluntary stand-by and call-outs.  The amounts received increased pay packets by over 50% and had been paid for several years.  Again, the Employment Tribunal Judge focused on the regularity of the payments rather than their contractual status.

The issue of whether additional payments are received sufficiently regularly or not remains a live and uncertain one.  The barrister who represented Mr White & Others has suggested that doing voluntary overtime once a quarter might be enough but a further hearing will have to determine that.

As Employment Tribunal level decisions, these are not binding on other tribunals and courts and we don’t yet know whether either case is going to be appealed.  However they continue the direction of travel in this area of law.  Employers who focused their attention after Bear Scotland on workers who undertook guaranteed or non-guaranteed overtime should now consider assessing their potential exposure in respect of workers doing regular additional voluntary work, although the definition of ‘regular’ will remain unclear until there is an appellate authority on the point.    However claims for underpaid holiday which follow from this ruling will still be limited by the 2 year backstop period introduced by the Government to mitigate the impact of Bear Scotland.   Finally it is worth noting that Mr White & Others were supported by UCATT in their claims and so unions may be seeking to promote this decision amongst their membership; we would therefore encourage employers to adopt a pro-active approach to identifying any issues they may have.

For further advice on this issue please contact Kirsty Thompson.

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