Your client will almost certainly be referring to the recent Court of Appeal case, East of England Ambulance NHS Trust v Flowers. In this case, the employees submitted a claim for an unauthorised deduction of wages, believing their employer had incorrectly failed to factor voluntary overtime into their holiday pay calculations.
The Court of Appeal ruled in favour of the employees, adding that voluntary overtime should be included in calculations for holiday pay when the work is ‘sufficiently regular and settled’. Although they didn’t provide any guidance on how to determine when work qualified as ‘sufficiently regular’ or ‘settled’, your client should note that this decision is now binding and will be key in any future disputes.
Whether your client needs to change their business practices will depend on their current approach to voluntary overtime and holiday pay. Previous advice from lower courts had suggested that voluntary overtime would be considered ‘regular’ if it were included at least once in every pay packet or in every pay period. Therefore, if your client already factors work of this regularity into holiday pay calculations then they should proceed accordingly. Having said this, it is important to note that this will only apply to holiday pay for the first four weeks of an employee’s annual leave entitlement.
However, if they do not already then they should consider changing their approach, making sure to keep accurate records of voluntary overtime and ensuring any ‘regular’ work is included in holiday pay calculations. The change to include voluntary overtime in holiday pay may come at an additional financial cost to your client, which could encourage them to adapt how regularly they offer overtime to staff in the future.
Alternatively, your client could stick to their guns and omit regular voluntary overtime from holiday pay calculations. Whilst this does come with significant risk, there is a chance that the decision may yet be appealed to the Supreme Court who could overturn the ruling.
Either way, whilst this new ruling does not change existing laws the fact that it has been handed down from the Court of Appeal means that it is perhaps the most significant employment law development of 2019 so far. It is therefore important that your client relays this information to relevant payroll staff and considers how to adapt any holiday pay calculations where necessary.
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