Binding Decision: Voluntary Overtime must be included in holiday pay

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Employers must urgently get their ‘house in order’ says union, following a significant decision which could have huge implications for UK businesses.

The decision by the employment appeal tribunal on an appeal by Dudley Metropolitan borough council is the first to confirm that payments for entirely voluntary duties, such as voluntary overtime, standby, call-out work and travel-time linked to that work, should be included in the calculation of workers’ holiday pay, says Unite.

In the case of Dudley Metropolitan Borough Council v Willetts (and others) the Employment Appeals Tribunal (EAT) said that voluntary overtime worked for a sufficient period of time on a regular and/or recurring basis should be included in the first four weeks’ paid holiday.

Unite assistant general secretary for legal services Howard Beckett, says: “The ruling means unscrupulous employers no longer have carte blanche to fix artificially low levels of ‘basic’ hours and then contend the rest of time was ‘voluntary’ overtime that did not have to be paid in respect of annual leave.

“Unite will be liaising with Dudley council and its legal team over reaching a satisfactory settlement for our members. In the meantime we would urge other employers who have been fleecing workers of their holiday pay to get their house in order or face legal action.”

The case against Dudley council involved 56 Unite members employed by the council as tradesmen, including plumbers, electricians and carpenters, working on maintaining Dudley’s housing stock.

They worked regular overtime, including on Saturdays, on a purely voluntary basis. They also elected to go on a standby rota every four weeks to deal with emergency call-outs and repairs.

In some cases their earnings for this additional voluntary work amounted to around £6,000 a year on top of their basic salary. While they would receive these payments while working, these amounts were not included in their holiday pay. The underpayments of holiday pay suffered by each claimant varied depending on how much voluntary work they performed between around £350 and £1,500 per year.

Their claims were initially successful and the Council appealed to the EAT.

The EAT upheld the earlier decision and drew on previous ECJ decisions which had emphasised that workers should receive ‘normal remuneration’ when they take a holiday.  Workers should not be deterred from exercising their rights to take paid annual leave and any reduction in salary is presumed to act as a deterrent.

The case was remitted back to the Tribunal to determine whether or not, on the facts, Mr Willett and his co-workers had been underpaid holiday.

Glenn Hayes, an employment partner at Irwin Mitchell, says: “Many businesses have adopted a ‘wait and see’ approach to voluntary overtime but this option is no longer possible and overtime that is worked regularly, must now be included in holiday pay.

“Not all voluntary overtime will have to be included but the EAT made it clear that overtime that ‘extends for a sufficient period of time on a regular or recurring basis’ will.

“There is no statutory definition of what amounts to ‘normal pay’ and Tribunals will continue to hear arguments about whether overtime, of whatever nature, has become part of an employee’s normal pay.”

The decision is unlikely to expose employers to backdated claims for voluntary overtime says lawyers because employees who have a break of more than three months between payments will not be able to argue that they have suffered a series of unlawful deductions.  This is because the requirement to include non-guaranteed overtime only relates to 20 days’ leave required under the Working Time Directive holiday and not to additional leave.

However, the decision may leave employers vulnerable to claims relating to underpayment of holiday in their current holiday year.

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