Although the Working Time Regulations 1998 introduced the concept of paid holiday, workers are still having to haggle over the amount they should be paid when they go on leave.
In the case of Bamsey & Ors v Albon Engineering & Manufacturing Plc, backed by the GMB and taken by Thompsons, the Court of Appeal has said that when calculating workers' holiday pay, employers do not have to include overtime working, unless it is contractual.
What were the basic facts?
Mr Sturge was the test case appellant. He was entitled, under his contract, to a basic working week of 39 hours, with substantial compulsory overtime, but which was not guaranteed. Nevertheless, apart from occasional variations, he was required to work a 58 hour working week.
Over the twelve weeks before the holiday period in question, Mr. Sturge had averaged 60 hours' work, but he was only paid for a basic 39-hour week when he went on holiday. Mr Sturge argued that he should have been paid at the same rate as he averaged, with overtime, while at work.
What was the relevant legislation?
The appeal court was asked to look at the provisions of two different pieces of legislation Ð the Employment Rights Act 1996 and the Working Time Regulations 1998 and how they interrelate.
First of all, it considered in detail the meaning of the term 'normal working hours' in sections 221-224 of the Act in order to calculate 'a week's pay'. It then considered the meaning of 'normal working hours' for the purpose of calculating paid holiday leave under regulation 16.
Finally, it looked at the effect of the meaning on 'a week's pay' of an employee whose contract of employment requires, but does not entitle him or her, to work overtime in addition to the basic contractual hours.
The difficulty, as the court emphasised, was that although the Act specifically defines 'normal working hours' by reference to a worker's entitlement to overtime in a working week, it says nothing about how it should apply that to calculating 'a week's pay' for each week of paid annual leave.
The interpretation of section 234 of the Act was crucial to Mr Sturge's argument. It says that if an employee works a fixed number of hours per week but also works overtime, the 'normal working hours' are the fixed hours (excluding the overtime). It is only if the overtime is contractual that it can be included in the definition of 'normal working hours'.
Mr Sturge argued that section 234 was not included in the regulations and should therefore not apply because it runs contrary to the purpose of the original directive.
That is, giving workers the right to paid annual leave. If workers get paid less during annual leave than when at work, what incentive do they have to take leave?
What did the Court decide?
The Court disagreed. It said that overtime working can only be included in the definition of 'normal working hours' for the purpose of calculating 'a week's pay' if the contract of employment requires the employer to provide that overtime and the employee to do it. That was not the case for Mr Sturge.
And the Court said that as regulation 16 incorporates the definition of 'normal working hours' in section 234, Mr Surge was not entitled to holiday pay at the same rate as he normally earned.
Nor did the Court think that there was anything in the regulations that ran contrary to the original Working Time Directive. Although it recognised that its purpose was to protect the health of workers, it did not think that member states were required to ensure that workers receive more pay during their period of annual leave than that which they were contractually entitled to earn at work.