The Employment Appeal Tribunal (EAT) has dismissed an appeal by Dudley Metropolitan Borough Council, ruling that voluntary overtime should be taken into account when calculating holiday pay. This landmark legal victory now means that employers must now incorporate regular voluntary overtime when calculating holiday pay. Unite Union are now advising employers to urgently address this issue and ensure they are compliant.
This ruling will affect a large number of employees throughout the UK who get paid for regular voluntary overtime but do not receive any annual leave entitlement payment for working it. This legal victory sets a legal binding precedent that employment tribunals throughout the UK are obliged to adhere to.
This landmark case involved an appeal that was brought by Dudley Metropolitan Borough Council and this is the first case that the Employment Appeal Tribunal decided to confirm that payments to employees for voluntary duties only should be included in the calculation of employees’ annual leave entitlement pay. In the EAT findings, under the European Union’s Working Time Directive, there is no distinction between contractually required work and tasks that are performed voluntarily under other special or separate arrangements, because levels of normal remuneration have to be maintained when calculating holiday pay in relation to the guaranteed four weeks of annual leave provided under EU law.
The EAT also upheld that where voluntary shifts, standby and call-out payments form part of normal pay, they should be included in holiday pay calculations so that no employee would be deterred from taking annual leave at no financial disadvantage.
The findings in the case of Dudley Metropolitan Borough Council v Mr G. Willetts and others builds on previous findings in the case Unite legal services took in 2014. This appeal resulted in a ruling covering holiday pay for employees that were contractually obliged to perform overtime.
56 employees of Dudley Metropolitan Borough Council, who were Unite members, took the case against Dudley Metropolitan Borough Council. These employees are employed by the Council as tradesmen who worked on maintaining the council’s stock of houses. They worked regular overtime on a voluntary basis only, which included working overtime on Saturdays. In order to deal with emergency call-outs and repairs, the employees decided to organise and a standby rota every four weeks.
For some employees, this additional voluntary overtime equated to approximately £6,000 per annum along with their basic salary. The Council paid the employees the amount due for the voluntary overtime worked, but the voluntary overtime was not included in their holiday pay calculations. The omission of this additional holiday pay was costing the employees between £350 and £1,500 per year, depending on the amount of voluntary overtime undertaken.
Howard Beckett, Unite’s Assistant General Secretary for legal services said:
“The ruling means unscrupulous employers no longer have carte blanche to fix artificially low levels of ‘basic’ hours and then contend the rest of time as ‘voluntary’ overtime that did not have to be paid in respect of annual leave.
Unite will be liaising with Dudley Metropolitan Borough Council and its legal team over reaching a satisfactory settlement for our members. In the meantime we would urge other employers who have been fleecing workers of their holiday pay to get their house in order or face legal action…”.