Overtime on holiday
Labour & European Law Review Weekly Issue 395 12 November 2014
In a decision that is likely to have a significant impact on employers, the Employment Appeal Tribunal (EAT) last week decided that normal overtime pay should be included in holiday pay calculations.
The judgment concerned three conjoined cases - Bear Scotland Ltd and ors v Fulton and ors; Hertel (UK) Ltd v Wood and ors; Amec Group Ltd v Law and ors - involving claims that the failure to include overtime in the workers’ holiday pay constituted unlawful deductions from their wages.
Unite the Union instructed Thompsons to act on behalf of its members who were employed by Hertel and Amec. The industry wide agreement under which Mr Wood and Mr Law worked (as well a supplementary agreement covering their specific project) stated that overtime would be required during the project, although it was not guaranteed. The agreement also made clear that overtime would not form part of normal working hours nor “any part of the calculations on holiday pay entitlement”.
Guided by the decisions of the Court of Justice of the European Union in Williams and ors v British Airways (LELR 238) and Lock v British Gas (LELR 377), the EAT held that workers were entitled - under the Working Time Directive - to their normal remuneration in respect of annual leave. As the employers in these cases required employees to work overtime (which they did regularly), overtime pay was remuneration which had to be included when calculating their holiday pay.
It is already settled law that workers can bring a claim for holiday pay as a claim for unlawful deductions of wages. However, the EAT held in this case that workers cannot make claims for arrears of holiday pay if more than three months have passed between deductions.
In addition, it is worth noting that holiday in this instance refers only to the four weeks specified under the European Working Time Directive and not the full 5.6 weeks’ paid holiday to which workers are entitled under the Working Time Regulations.
The government has already announced that it is setting up a taskforce with the express aim of discussing how the impact of the ruling on business can be limited and the EAT has given permission for its decision to be appealed to the Court of Appeal.
Alys Cunningham from Thompsons Solicitors said: “This decision should benefit millions of workers who are normally required to work overtime and until now have received basic pay only when on holiday, which now needs to change.
“The government’s reaction to the Judgment is hardly surprising as they intervened in the appeals in support of the employers’ arguments, however the retrospective value of claims is already limited by the EAT’s decision on the series of deductions point and any other attempts to limit the impact must be vociferously rejected.”