Update on holiday pay: regular and settled voluntary overtime should be included

The Court of Appeal in East of England Ambulance Service v Flowers has confirmed that non-guaranteed overtime and voluntary overtime which is sufficiently regular and settled should be included in holiday pay.

The Court considered the recent decision by the ECJ in Hein where it commented that voluntary overtime should not be included in holiday pay given its exceptional and unforeseeable nature.  The Court decided that the ECJ did not intend to make a “handbrake turn” contradicting its own decisions but was distinguishing between regular and predictable overtime and unforeseeable overtime.  To conclude otherwise would be to leave workers at risk of abuse by unscrupulous employers who could engage workers on artificially low levels of basic contractual hours and categorise the remaining working time as “overtime” which wouldn’t be included in holiday pay.   

This decision gives clarity at Court of Appeal level that voluntary overtime should be included if it is sufficiently regular and settled.  However, the Court gave no guidance on what that actually means leaving it for the tribunal to determine on a case-by-case basis and as a result this aspect remains a potential area of future litigation.  It should be remembered that this decision only applies to the four weeks’ leave under the Working Time Directive. 

The Flowers case is likely to be appealed to the Supreme Court, particularly in the light of the comments by the ECJ in Hein.   However, as the ECJ has repeatedly stated that there must be no disincentive to workers taking annual leave, it seems unlikely that the Supreme Court would find that overtime should not be included particularly as the Hein case itself was not about voluntary overtime.  Employers who are yet to include voluntary overtime in their workers’ holiday pay should take advice on the risks of not doing so in their particular circumstances. 

For more information, please contact Emily Chalkley.