The Court of Appeal has handed down a judgement in the case of East of England Ambulance Service NHS Trust v Flowers which concerned whether pay for voluntary overtime should be included in holiday pay.
In this case:
- Mr Flowers and other claimant who were paramedics sometimes undertook both non-guaranteed and voluntary overtime with their employer.
- The ambulance service did not include any overtime in the claimants’ holiday pay
- The claimants brought a claim to tribunal for breach of contract and breach of the Working Time Directive (WTD). The tribunal held that the non-guaranteed overtime should be included in the calculation of the claimants holiday pay as a matter of contract and under the WTD. However, it rejected the claims to include voluntary overtime.
- The claimants brought an appeal to the EAT on the voluntary overtime issue. The EAT found that the voluntary overtime could be included in the WTD holiday pay calculation and remitted the case to the tribunal for case-by-case assessment in accordance to the overarching principle in the case of Dudley Metropolitan Borough Council v Willets and others which held that holiday pay should correspond to normal remuneration.
- In relation to the contractual claim, the EAT considered the employer is required under the proper construction of section 13.9 of Agenda for Change, which is the main pay system for NHS staff, that they should calculate holiday pay on the basis of what the employee would have been paid if at work.
- The ambulance service appealed this decision to the Court of Appeal.
The Court of Appeal endorsed the EAT’s decision in relation to the contractual claim brought by the claimant, upholding the idea that section 13.9 of Agenda for Change creates a contractual entitlement for voluntary overtime to be considered when calculating holiday pay. Additionally, there is no basis for the differentiation between non-guaranteed overtime and voluntary payments for this purpose.
The WTD claim was also agreed with the EAT’s decision, commenting that the EAT conducted “clear and persuasive analysis” in Willets and have nothing further to add.
NHS Organisations must consider all voluntary overtime worked in the previous three-month reference period (or other agreed reference period) when calculating holiday pay, which applies to all staff employed on Agenda for Change terms and conditions of employment. This states that:
"Pay during annual leave will include regularly paid supplements, including ... payments for work outside normal hours ... Pay is calculated on the basis of what the individual would have received had he/she been at work. This would be based on the previous three months at work or any other reference period that may be locally agreed".
Many NHS organisations have already acquired this practice however it should be noted that those who have not should do so soon as a result of the successful appeals of Flowers and Willetts.
This case is also relevant to other employers who are non-NHS organisations and in both the public and private sector. This is because the decision takes into account the WTD rather than the Working Time Regulations 1998 (WTR 1998).
However, if a non-NHS organisation does not have contractual provisions equivalent to Agenda for Change, then there is the issue of whether a worker’s voluntary overtime meets the threshold of regularity. This could lead to potentially be an issue arising in holiday pay cases.
It is recommended that some employers should routinely include all overtime payments in their holiday pay calculations, although they must consider that administrative costs of distinguishing between an employees’ overtime patterns could potentially be too high or complex.
If you require any assistance with calculating an employee’s holiday pay, then please do not hesitate to get in contact with us.