BUSINESS NEWSLETTER
This newsletter would be short as it is the silly season; however I have looked at a rather important legal case on the issue of ‘holiday pay’. It is worth a read.
Holiday Pay Case
The most recent holiday pay case is Dudley Metropolitan Council v Willett & Other’s (2017).
The case was appealed in the EAT because of the calculation of holiday pay by the Judge at first instance. The appeal was obviously resisted by the employees as it is in their favour.
References found in this newsletter are references to paragraphs in the actual judgement.
Facts
The claimants (56 of them) were employees of the council. They were responsible for fixing the council’s housing stock. They claimants comprised of plumbers, electricians, roofers, storemen etc. They had contracts of employment. There standard hours of work was 37. Then some had contractual overtime of between 2-4 hours per week. There was additional overtime that could be earned and it was the choice of the employees whether or not they did this over time (paras 4 to 5).
The dispute was whether the additional voluntary overtime should be included as part of ordinary pay when determining a persons’ holiday pay calculation.
The elements of additional voluntary pay that was in dispute for the purpose of calculating holiday pay was:
1. Out of hours standby pay
2. Call out allowance
3. Voluntary overtime
4. Mileage or travel allowance linked to the above.
The Employment Judge referred to the decision of Williams and stated clearly that the test is ‘what is normal pay’ and in this regard it was for her; that which was intrinsically linked to the performance of the task. In Williams the advocate general said that employees must not suffer any disadvantage in taking leave and must receive normal or average remuneration so as not to suffer a disadvantage. Thus the Judge applied the test of what was to be considered normal pay to each of the issues in dispute.
Thus the Judge found:-
1. Out of hours standby pay – did fit within the definition of normal pay.
2. Call out allowance – again this fitted within the definition. It was intrinsically linked to his work and a payment for working during antisocial hours.
3. Voluntary overtime, fell within the definition of ordinary working hours as explained by the Attorney General in the William’s case.
4. Mileage or travel allowance linked to the above was viewed as benefit in kind and still part of normal pay as explained in the William’s case (see para 7)
The employers thus appealed this decision and as I explained before it was vigorously defended by the employees’ lawyers.
The employer’ argument was that pure voluntary overtime was not intrinsically linked to the performance of the task and therefore should not be taken into consideration when calculating overtime pay. The employers relied on the cases of Lock v British Gas C-539/12 [2014] ICR 813 and British Airways v Williams and others C-155/10 [2012]/ ICR847 which clearly stated that such payments did not amount to remuneration for the purpose of calculating holiday pay (see para 2).
Hence the appeal.
Employment Appeal Tribunal
The Judge explained the four week holiday entitlement pay was established by virtue of the Working Time Directive Article 7 (UK, Working Time Regulations 13 and the additional leave (the additional 8 days) which is a national law derived from regulation 13A. The importance of this distinction is that the calculation of holiday entitlement applies only to 4 weeks.
Mr Jones QC, acted for the Council, his submissions (see paras 31 to 34) regarding how holiday pay should be calculated (although clever and appear almost sound; I am laughing) was rejected by the Judge.
Mr Ford’s, acting for the claimant’s submission were accepted. He argued:
1. The rational for the rule was to ensure that during their rest period workers received remuneration that was comparable to when they were working; because any payment that placed a worker at a disadvantage may deter him or her from taking a holiday.
2. To exclude the overtime therefore would be incompatible with the objective of article 7 of the Working Time Directive.
To support his submissions Mr Ford relied on the opinion of the Advocate General in the William’s case and aspects of the case of Lock. The Judge accepted Mr Ford’s submissions and explained why:
1. Paid annual leave is an important part of EU social law and there is nothing in the Working Time Directive that allows the UK to depart from compliance.
2. Overtime does constitute remuneration as part of EU domestic law.
3. EU law is clear, normal contractual pay for 4 weeks must be used to calculate holiday pay. The principle that this pay should be calculated based on normal remuneration can be found in the cases of Williams and Lock.
Case Comment
I do not believe that for one minute this decision should be a surprise to anyone. Although we have the Exit bill upholding all EU laws; only time will tell what will happen to cases like this once we are out of the Union. My view, if we want to trade we will still have to comply with laws compatible with the laws of the EU.
The Judge in this case also had a social conscience because if we simply accepted the employer’s argument; technically it would have mean that employees on zero hour contracts would not be entitled to holiday pay. Such a decision could not stand as it would be truly incompatible with current EU law.