Employment Rights Act 1996

Holiday Pay and Voluntary Overtime

Readers will remember that last November employment law broke the ranks of the obscure blogs and hit the mainstream as the likes of the BBC reported that millions of workers who perform regular overtime could benefit from a claim brought by the Unite Union (alright, the fact that this was a union backed case was not that prevalent).

The case in question was Bear Scotland Ltd & Ors -v- Fulton & Ors. At the risk of gross simplification the case can be summarised by the following example: an employee (let’s call her Emma) has a contract that pays her £500 a week basic pay for 40 hours of work.  However, she is also required by her contract to perform an extra 5 hours a week overtime for which she is paid an additional £100 a week. Therefore, every week she works she receives pay of £600 a week.

Emma has four week’s (28 days) holiday a year. She chooses to take one week’s leave. This case addressed the question of how much she would be paid for that leave: would it be £500 which is her normal basic pay for a week’s work or would it be £600 to include the £100 pay she would received for the overtime she did not need to work but would have done had she not taken a week’s leave?

The case of Bear Scotland was based on the Working Time Regulations. Regulation 13 of these requires that employers must five an employee 28 days leave a year and that this leave must be paid. Regulation 16(1) requires workers are entitled to be paid for annual leave at the rate of a week’s pay in respect of each week of leave – therefore the case turned on what was “a week’s pay”. The EAT found that they had to interpret UK legislation in the light of the Working Time Directive (which the WTR purported to implement) and that, following article 7, the week’s pay should be the normal week’s pay. In Emma’s case, therefore, since she was always paid £600 when working, her pay on her week off should also be £600. If in fact her employer paid her just her normal basic pay on her week off then Emma would have a claim that her employer had made an unlawful deduction from her wages.

That was an important win for many employees and one for which due credit should go to the Unite Union. The fact that the judgement had the potential improve the working lives of British workers can be seen in the haste in which the Coalition Government sought to minimise its impact. At the same time that David Cameron was telling the media that what British workers needs a pay rise his government and which could not find the time to commit to outlawing Caste discrimination because of a lack of parliamentary time, could find the time to introduce the The Deductions from Wages (Limitation) Regulations 2014 to limit the effectiveness of the judgement and so prevent workers making a claim (and potentially receiving a pay rise) for anything more than two years of unlawfully withheld salary.

Voluntary Overtime

As soon as the Bear Scotland decision had been promulgated there was uncertainty over the extent to which the judgement applied to regular voluntary overtime. Suppose, for example, that that Emma’s five hour’s a week overtime is not contractual but just the average amount of overtime she did per week. Should she still be paid £500 or £600 for her week off on holiday? Given the reference to “normal” salary and the similar findings that commission is included in salary (see the judgement of the ECJ in Lock v British Gas Trading Ltd) it seemed likely that it was. However, there has still been no clear decision at appellate level on this question in England and Wales.

Nonetheless, although not binding on English and Welsh Tribunals the decision of the Northern Ireland Court of Appeal on this very issue in Patterson v Castlereagh Borough Council is a strong indication that voluntary overtime should be included in calculations on holiday pay. Mr Patterson averaged four hours a week voluntary overtime but was not paid for this when his holiday pay was calculated. The Court of Appeal, overturning the first tier tribunal, found that normal salary must include average overtime.

Although, as I say, the judgement is not binding on English and Welsh Tribunals the case is a reminder that in a time of wage restraint the Holiday pay rulings whether in respect of contractual or voluntary overtime represent a good organising forum for trade unionists – I am certainly aware of many employers who habitually fail to incorporate voluntary overtime into holiday pay arrangements. We need to alert to such situations as they are ripe for collective organising and claims that not only represent an opportunity for real pay rises for members but also an opportunity to enhance the standing of trade unions in the workplace.

 

Cases cited:

Lock v British Gas Trading Ltd (Judgment of the Court) [2014] EUECJ C-539/12

Patterson v Castlereagh Borough Council 26 June 2015 NICA

Bear Scotland Ltd & Ors -v- Fulton & Ors [2014] UKEAT 0047_13_0411

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