A number of recent tribunal cases have indicated a persuasive move to include voluntary overtime when calculating holiday pay. As a result, questions have been raised as to what is compulsory overtime, voluntary overtime and what is meant by ‘normal pay’ and ‘sufficiently regular’.
The compulsory/voluntary overtime distinction
Following the Bear Scotland decision, a distinction has been made between compulsory overtime (which does count towards holiday pay) and voluntary overtime, with voluntary overtime being defined as “work which the employer asks an employee to do but which the employee is free of any contractual obligation to perform unless he agrees at the time to do so”.
Voluntary overtime did not arise on the facts of Bear Scotland, so was left undecided, although we now have the persuasive judgment in Patterson. Following Bear Scotland, employers had sought to rely on the distinction to justify the difference in holiday pay calculations for compulsory and voluntary overtime.
Dudley MBC employed a number of tradesmen to work on the Council’s portfolio of social housing. The tradesmen were invited to work on a Saturday on a purely voluntary basis, and voluntarily went on standby to handle repairs and emergencies, every four weeks. A claim was made for unpaid holiday pay and argued that the voluntary work and stand-by had been so regularly performed that they formed part of their “normal” work and this should be reflected accordingly in their holiday pay. The Council maintained that the tradesmen were under no contractual obligation to undertake this extra work and, as the work was voluntary, it therefore didn’t equate to contractual pay. Employment Judge Warren ruled that the Claimants’ voluntary overtime, voluntary standby and voluntary call-out payments should be considered “normal pay” when undertaken with “sufficient regularity”, which means they should be reflected when calculating a worker’s holiday pay. In this instance, because the Claimants had worked overtime on a Saturday for a number of years and performed call-outs for a number of years, payment for this voluntary work became part of their normal, expected pay.
For employers this means that workers who work voluntary overtime regularly may be entitled to holiday pay for that voluntary overtime, if it has been sufficiently regular over a significant duration. What remains uncertain is what is meant by “sufficiently regular”, with the Claimants’ barrister suggesting that this may be as broad as including overtime undertaken once per quarter.
The decision isn’t binding but is indicative of the approach that the Tribunal is taking, and therefore employers should prepare accordingly. Employees who regularly work extra hours and are remunerated for those hours may now consider bringing a claim for unpaid holiday pay. Employers will want to consider how much and how regularly they rely on voluntary overtime in the running of their business, to quantify potential liability. We will update you on the appeal decision from the Dudley MBC case.