Another Employment Tribunal has found that payments for voluntary overtime, out of hours standby allowances, call out allowances and even the taxable elements of travel payments should be included in the first 20 days holiday pay provided they are linked to work and have been paid regularly enough to be considered part of a worker’s normal remuneration.
Our employment experts explain this decision and examines whether Brexit might change the direction of travel for holiday pay claims.
Background
In Brettle and others v Dudley Metropolitan Borough Council, ET, 56 employees brought claims for underpaid holiday, including voluntary overtime payments and other allowances they were paid to undertake out of hours work. The parties identified five individuals from this group (as lead claimants) as it believed that their claims represented the issues to be determined which could be applied to the remaining claims without the need to proceed to final hearings in all cases.
Decision
The Employment Tribunal accepted that it there is no binding authority in relation to purely voluntary overtime and said that it was “sailing into unchartered waters”. [The Irish Court of Appeal’s decision in Patterson v Castlereagh Borough Council that found that there is no reason in principle why voluntary overtime should not be included in holiday pay is not binding in the UK.]
The Judge in this case made it clear that the starting point for all holiday pay questions is to establish what constitutes “normal pay”. Applying this principle, the Judge found that out of hours standby payments and call out allowances had all been regularly paid (at a rate of one week in four or one week in five) and should be included.
The issue with regard to travel allowances was however more complicated. The allowance that was paid by the Company was at a higher rate than that recognised by HMRC to compensate the workers for the actual costs of their travel. The Judge ruled that the HMRC element should be excluded from the holiday pay calculation but that the taxable remainder should however be included as it was a benefit in kind.
It went on to find that only voluntary overtime that had been regularly worked should be included in holiday pay and this excluded one individual who worked voluntary overtime “rarely”. By contrast, an individual who regularly worked overtime on Saturday and counted this as part of their “normal” working pattern was entitled to have these payments included.
The Tribunal agreed with previous authorities which found that the right to include all regularly worked payments only applies to the first 20 days of leave taken each year and not to the additional statutory leave (eight days) or any contractual leave.
Comment
Despite the efforts of British Gas in the Lock case (the decision of the Court of Appeal remains outstanding on this) to challenge the legitimacy of the practice of reading in appropriate words to our Working Time Regulations to comply with the requirement of the ECJ for workers to be paid their normal remuneration when they take annual leave, the direction of travel seems to be now well established and any regular payments that are linked to the work performed will have to be included in calculating the first 20 days of holiday pay.
The Working Time Regulations were introduced following the adoption of the European Working Time Directive and some of our clients have sought advice on whether it is (as well as other legislation derived from Europe) likely to be repealed as a result of the Brexit vote.
It is possible that the Working Time Regulations may, at some point in the future, be repealed (or more likely amended) but until that happens, UK businesses will remain bound by the body of emerging case law on this issue.
At the moment, the UK has not yet served notice that it intends to leave the EU (the so called “Article 50” notice). The exit rules provide that countries have a minimum of two years’ to negotiate the terms of exit and time does not start to run until Article 50 is served.
Even if the UK does decide to go its own way and, as such, can decide which laws it wishes to retain or repeal, it is unlikely that employment legislation will be top of its agenda. In addition, most experts believe that it will take years for the Government to “unravel” the legislation that it wishes to retain or adapt, from that it wishes to completely repeal.
The uncertainty over what a post Brexit business landscape will look like is likely to prevail for a number of years and during this time businesses will have to decide how they are going to approach the tricky issue of holiday pay.
This issue remains live and there are likely to be many more cases that are heard by the tribunals and appeal courts which will determine some of the other outstanding issues such as whether businesses can continue to run technical arguments about whether there has been a break in a series of unlawful deductions to reduce their potential financial liability.
My advice to those employers who have not yet developed a strategy to deal with holiday pay claims is to start to think about it. The outcome of the Brexit vote is not a “get out of jail free” card and careful preparation is the key to minimising risk. Developing a proactive approach to minimise or at the very least calculate possible liabilities would be well advised.
Employment Law Update - September 2016
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