East of England Ambulance Service NHS Trust v Flowers & Ors

Holiday pay under a collective agreement is not confined to basic pay where the agreement provides for the pay the employee would have received at work. Overtime, including voluntary overtime, may therefore be included where the agreement read as a whole supports that construction.

Under Article 7 of the Working Time Directive, normal remuneration must be maintained during the minimum four-week leave period. The decisive question is whether the pattern of work is sufficiently regular and settled for the payment to form part of normal remuneration. Compulsion under the contract is not a separate requirement. Hein distinguishes exceptional, unforeseeable overtime from broadly regular and predictable overtime.

Employees of the Trust claimed unlawful deductions from holiday pay. They relied on their contractual terms and, alternatively, Article 7 of the Working Time Directive. The claim concerned non-guaranteed overtime, worked where a shift overran, and voluntary overtime, which employees were free to accept or refuse.

The Employment Tribunal allowed the contractual claim for non-guaranteed overtime but rejected the claim for voluntary overtime. On appeal, the Employment Appeal Tribunal, in UKEAT/0398/17/JOJ, allowed the contractual claim for voluntary overtime, held that it also counted under the Directive following Dudley MBC v Willetts [2018] ICR 31, and dismissed the Trust’s cross-appeal. The Trust appealed, raising the contractual construction and the scope of Article 7.

Appeal dismissed. The Court of Appeal unanimously upheld the Employment Appeal Tribunal on both the contractual and Working Time Directive issues.

1. Contractual entitlement. Clause 13.9 of “Agenda for Change” had to be read as a whole. Its reference to pay during annual leave being based on what the employee would have received at work was not confined to basic pay. The express reference to regularly paid supplements was included for the avoidance of doubt and did not exclude other components of pay. The omission of an express reference to overtime did not show an intention to exclude it. Voluntary and non-guaranteed overtime were not materially distinguishable. The specified three-month reference period applied.
2. Article 7 principle. The CJEU authorities, including Robinson-Steele v RD Retail Services Ltd [2006] ICR 932, British Airways PLC v Williams [2012] ICR 847 and Lock v British Gas Trading Ltd [2014] ICR 813, establish that remuneration during annual leave should correspond to normal remuneration. The purpose is to place the worker in a position comparable to work and avoid a financial deterrent to taking leave. The reference in Williams to tasks required under the contract did not impose a separate requirement that overtime be compulsory.
3. Regularity and voluntary overtime. Following Dudley MBC v Willetts [2018] ICR 31, the relevant inquiry is whether the pattern of work is sufficiently regular and settled over a sufficient period for the payments to amount to normal remuneration. Regular voluntary overtime may satisfy that test. An intrinsic link with contractual tasks is decisive where present, but it is not the only route to inclusion. Bear Scotland Ltd v Fulton [2015] ICR 221 did not establish a compulsory-overtime requirement.
4. Hein. Hein v Albert Holzkamm GmbH C-385/17 was interpreted as distinguishing exceptional and unforeseeable overtime payments from broadly regular and predictable payments. The Court rejected the Trust’s reading of paragraph 46 as a general exclusion of overtime, since that would contradict the established normal-remuneration principle and create the risk of artificial fragmentation of pay. Lady Justice Asplin agreed with those reasons and Lady Justice Nicola Davies agreed with both judgments.

• Court of Appeal (Civil Division): In the present judgment, [2019] EWCA Civ 947, dismissed the Trust’s appeal on both the contractual and Directive issues.
• Employment Appeal Tribunal: Soole J, in UKEAT/0398/17/JOJ, allowed the claimants’ contractual appeal, held that voluntary overtime counted under Article 7 following Dudley MBC v Willetts [2018] ICR 31, and dismissed the Trust’s cross-appeal concerning non-guaranteed overtime.
• Employment Tribunal: Held that non-guaranteed overtime counted in contractual holiday pay but voluntary overtime did not, and accepted the same distinction for the statutory claim.