The sun has finally got his hat on so it feels rather apt that the West Midlands Employment Tribunal has just decided on another holiday pay case in White v Dudley Metropolitan Borough Council. In this case, the Employment Tribunal held that regular voluntary overtime (and voluntary standby and voluntary call-out payments) should be included in holiday pay calculations. As you will be aware, the Courts have previously confirmed that the first 20 days of annual leave (or Regulation 13 leave under the Working Time Regulations) should contain all elements of contractual pay including non-guaranteed (but required) overtime (you can read our post here). It was not, however, clear whether it should also include elements of voluntary pay.
In this case the Claimants were tradesmen who carried out repairs to the Council's housing stock. The Claimants all worked (voluntary) overtime on a Saturday and joined (on a voluntary basis) a rota as standby for emergency call out work. When it was their turn on the rota week, they worked their normal 9-5 hours, and then remained on standby through the night and weekend to carry out any emergency repairs that were needed during that time. In terms of payments, they received their basic pay; an additional lump sum for their standby week; and payment of time and a half for any Saturday overtime. The Council calculated their holiday pay based on their basic pay, and did not take into account their Saturday overtime or their standby/call out week. The Council had no contractual power to require anyone to work on a Saturday or go on the standby rota. Therefore, the Council argued that the voluntary overtime payments could be excluded from holiday pay calculation as it was 'voluntary' and not 'linked intrinsically' to work done under the contract (as per the decision in Williams v BA). They argued that overtime payments only needed to be included if there was a contractual obligation to perform them (ie it could be linked to the contract).
The Tribunal disagreed with the Council and accepted that for the first 20 days' Regulation 13 leave, the correct question to ask was whether the voluntary work had been undertaken with 'sufficient regularity' to become part of the employee's normal work and thus their normal pay. If it had then it should be included in the holiday pay calculation. Applying this decision will only technically relate to Regulation 13 holiday and only for people for whom the work has become 'regular'. A future remedy hearing will determine what 'regular' means. The barrister in this case has indicated his view that 'one day per quarter' should be sufficient to be classified as 'regular' but for example working voluntary overtime once or twice a year would not be enough.
This case, whilst only a first instance decision, does provide some clarity and evidences the approach that Tribunals are likely to take on this issue. Importantly, the judge accepted that for Regulation 13 holiday pay, the question was not 'whether the work was intrinsically linked to the contract' but whether it had become 'normal pay' – ie that which is normally received. There is a possibility that the Council may yet appeal the decision (and most employment lawyers will probably hope that they do, so greater clarity can be obtained from an EAT decision (or potentially the higher Courts)). However, given that voluntary overtime is the most common form of overtime in the majority of sectors, to the extent this type of overtime is not already featuring in holiday pay calculations, this decision could have wide-reaching ramifications.