The Lifeline Project was a well-regarded charity. Failure to carry out the targets within the contracts led the charity into insolvency and resulted in a personal, 7-year disqualification order.
Over recent years, we have seen numerous, well-publicised decisions, around whether holiday pay should include additional elements of pay (such as overtime and commission) when that pay is for work that is compulsory, guaranteed or voluntary:
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In this case, the Claimants were ambulance staff who brought a claim against the Trust for the way in which it calculated their holiday pay.
As ambulance staff, the nature of their employment meant that when responding to an emergency, they could often work beyond the end of their scheduled shift (this additional time known as “shift overruns”). The Claimants received additional pay in the circumstances where their scheduled shift overran. The Claimants argued that this was compulsory overtime, and therefore the remuneration received should be included when calculating holiday pay.
In addition to this, the Claimants were also free to choose whether or not they volunteered for additional overtime shifts, which the Trust were not required to offer, nor were the Claimants obliged to accept. They argued that the voluntary overtime pay should also be included in the calculation of the holiday pay.
The Employment Tribunal held that in their line of work, the Claimants could not simply “down tools” and go home, meaning they had a contractual requirement to work “shift overruns”. As a result, the overtime pay for “shift overruns” (described as non-guaranteed, compulsory overtime) was included for the purposes of calculating holiday pay.
However, the claim that their voluntary overtime ought to be included was unsuccessful. The Tribunal noted that there was no obligation on the Trust to offer overtime, nor was there an obligation on the Claimants to accept overtime shifts offered. As a result, the Tribunal considered that the voluntary overtime was not “intrinsically linked” to the contractual duties that the Claimants were obliged to undertake in the same way that the “shift overruns” were. The Tribunal also noted that the voluntary overtime was ad hoc and as it did not form part of a regular pattern, it shouldn’t be classed as part of ‘normal pay’.
Whilst only an Employment Tribunal decision, and therefore subject to appeal or different treatment in other Tribunal decisions, the case is worth noting, particularly for those operating in sectors where the nature of the role means that employees cannot simply “down tools” when their shift ends and receive additional pay for any additional work undertaken.
The case also reiterates the fact-specific approach that Tribunals still appear to be taking in relation to holiday pay. The decision confirms that Tribunals are ready to include pay for overtime where that overtime is either intrinsically linked to contractual duties, or forms part of a regular pattern.
However, the case does raise other questions about circumstances where staff receive payments in respect of voluntary/additional work that there is no contractual requirement to perform. In this case, the Tribunal decision was based, in particular, on the conclusion that the “examination of the time sheets and further information demonstrated there is no pattern to the voluntary overtime. It varies depending on the nature of the role, the type of work undertaken and the needs of the organisation.”
The Tribunal noted that: “In the event that the tribunal were wrong in its conclusions on voluntary overtime it accepts the alternative submission on behalf of the Respondent that it would be necessary to conduct a case by case assessment of each of the Claimants to ascertain the differing circumstances of individual Claimants, and whether or not the regularity with which the overtime was performed was sufficient for it to count as normal remuneration“.
Our view remains that where the pattern of overtime is settled, even if such overtime is voluntary, there is a strong argument that there would be no difficulty identifying normal pay and that the calculation of holiday pay should include the overtime pay. However, where staff are working more sporadic voluntary overtime, there is no regular pattern, and voluntary overtime is ad hoc, our view is that payment in relation to that work would not form part of ‘normal pay’ and, therefore, would be unlikely to count for holiday pay purposes.
It would be prudent for employers to review their holiday pay arrangements to ensure they are correctly calculating holiday pay and understand the required elements. Equally, employers should review their contractual clauses around holiday pay and overtime, so that they do not inadvertently include elements as contractual.
Employers may also be interested to know that the European Commission has recently published an Interpretative Communication concerning the Working Time Directive (2003/88/EC) (the WTD), which offers guidance on the different aspects of the WTD – it is not binding on member states.
To assist employers with setting up their holiday pay arrangements, we have produced a toolkit which sets out the legal position and provides guidance to achieving compliance. To purchase a copy of our toolkit, please get in touch with Lynsey Harrison - 0121 214 3615, firstname.lastname@example.org.
You can read the full judgment here.
For more information
If you want to discuss your approach to holiday pay or have any questions around this briefing, please get in touch with your usual contact or speak to Anna Dabek.
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