Bamsey & Ors v Albon Engineering & Manufacturing Plc

For statutory holiday pay, overtime forms part of an employee’s “normal working hours” only where the employment contract obliges the employer to provide it and the employee to perform it. Regulation 16 of the Working Time Regulations 1998 incorporates the calculation machinery in sections 221–224 of the Employment Rights Act 1996, together with the definition in section 234.

Article 7 of the Working Time Directive guarantees at least four weeks’ paid annual leave but leaves national law to determine the basis of payment. It does not require holiday pay to equal average earnings from overtime which the employer was not contractually bound to provide. The conforming-construction principle cannot displace the clear domestic calculation scheme.

The appellants were employees whose contracts provided for a basic 39-hour week and compulsory but non-guaranteed overtime. The test appellant regularly worked about 58 to 60 hours weekly. He earned nearly £330 a week before taking leave but received just under £200 a week during leave because the employer calculated his holiday pay using the basic contractual hours.

An Employment Tribunal held that the overtime was outside his “normal working hours”. On 27 March 2002 the Employment Appeal Tribunal upheld that decision. The employees appealed.

The central issue was whether regulation 16 of the Working Time Regulations 1998, when incorporating sections 221–224 of the Employment Rights Act 1996, also incorporated section 234. A further issue was whether article 7 of the Working Time Directive required a broader, purposive construction based on the hours regularly worked.

1. The appeals were dismissed unanimously. Auld LJ gave the leading judgment. May and Jacob LJJ agreed. The contractual overtime did not form part of the appellants’ normal working hours because the employer was not obliged to provide it.

2. For the purposes of the Employment Rights Act 1996, sections 220–224 must be read with section 234. Where overtime is payable, it counts as normal working hours only if the contract imposes mutual obligations: the employer must provide the overtime and the employee must perform it. An employee’s obligation to work overtime whenever required is insufficient if the employer need not offer it.

3. Regulation 16 of the Working Time Regulations 1998 incorporates section 234 by necessary implication. Sections 221–224 depend upon the statutory meaning of “normal working hours”, and section 223(3) expressly refers to section 234. Regulation 16(3) modifies specified aspects of the statutory machinery but neither excludes section 234 nor modifies that reference. The corresponding definition of “week” in section 235 is likewise incorporated.

4. Article 7 of the Working Time Directive establishes an entitlement to at least four weeks’ paid annual leave. It leaves the conditions of entitlement and granting to national legislation or practice. The Directive does not prescribe the amount of holiday pay, require equivalence with average working earnings, or require pay to be calculated by reference to “working time” under article 2.1.

5. The conforming-construction principle therefore provided no basis for excluding or rewriting section 234. The domestic scheme was clear and fell within the discretion left to Member States. Nor was there evidence that calculating holiday pay under section 234 generally frustrated the Directive by deterring workers from taking leave.

6. The possibility that employers might manipulate basic contractual hours did not alter the construction. Possible abuse, without supporting evidence, would rarely assist statutory interpretation. No reference to the European Court of Justice was necessary. The appeal was dismissed, with no order as to costs, and permission to appeal was refused.

1. Court of Appeal (Civil Division): The appeals were dismissed by [2004] EWCA Civ 359 . The court upheld the conclusion that compulsory but non-guaranteed overtime was excluded from normal working hours when calculating holiday pay.
2. Employment Appeal Tribunal: On 27 March 2002, the EAT upheld the Employment Tribunal’s decision.
3. Employment Tribunal: The tribunal held that holiday pay was calculated using the basic contractual hours and did not include overtime which the employer was not obliged to provide.