We await the outcome of two recent appeals to the Employment Appeal Tribunal on this topic. The appeals were heard at the end of July, although the outcome of those appeals may not give us a much needed quick answer. The current state of play is as follows:-
The issue was first addressed in the case of Williams v British Airways, in which airline pilots claimed that they ought to have been paid flying time supplements whilst on holiday. The Supreme Court referred the matter to the European Court of Justice, which considered the Working Time Directive (ie. the European law which the UK has to comply with) and held that, under EU law, workers taking statutory holiday are entitled to receive their "normal remuneration". This includes not only basic salary but also remuneration "intrinsically linked to the performance of the tasks" that they are required to carry out under their contracts.
After that, and relying on the Williams case, the Employment Tribunal heard the case of Neal v Freightliner Ltd, which considered whether voluntary overtime pay should be included when calculating holiday pay under the Working Time Regulations. In this case the Claimant, throughout his overtime periods, was performing tasks that he was required to do under his contract. The voluntary element did not break the "intrinsic link" to his tasks, per Williams. Voluntary overtime was therefore to be included too. This was closely followed by Wood and others v Hertel (UK) Ltd, again an Employment Tribunal decision, in which the tribunal held that "compulsory" overtime (where the worker must work overtime if required to do so by the employer) and incentive bonuses must be included in the calculation of holiday pay. The Wood case is one of those currently before the Employment Appeal Tribunal, along with the case of Fulton and another v Bear Scotland Ltd. In Fulton, the tribunal reached the same decision in relation to overtime which could be refused on reasonable grounds.
As previously reported, the European Court of Justice (ECJ) then published its decision in Lock v British Gas, adding commission to the list of items to be included in holiday pay calculations.
Recent Practical Developments
Having cottoned on to this, a number of trade unions are now contacting members seeking mandates to act for them in relation to holiday pay claims where the worker/employee has been working regular overtime or receiving shift allowance or commission. The word is spreading that such claims may be both valuable and numerous.
There are various options open to employers, in terms of dealing with this issue, but they must be considered in the light of the employer's particular circumstances. Employers may want to reduce future liabilities, or take steps to try to mitigate past liabilities. Alternatively, they may wish to simply sit tight and wait to see what the state of play is once the above cases have been decided. Strategies should be individually tailored and well thought-out, but whether you are an employer or an employee affected by this issue, you should take legal advice.