In Neal v Freightliner Ltd an employment tribunal has held that a freight worker was entitled to have overtime payments and shift premia counted towards his holiday pay. The payments were intrinsically linked to the performance of the tasks he was required to carry out under his contract of employment. Consequently, they should be taken into account when calculating his remuneration during annual leave, following the judgment of the European Court of Justice in British Airways plc v Williams and ors 2012 ICR 847, ECJ (Brief 935). The tribunal achieved this effect by construing the Working Time Regulations 1998 SI 1998/1833 so as to disapply Ss.223(3) and 234 of the Employment Rights Act 1996 when calculating holiday pay.
N was employed by F Ltd as a Multi-Skilled Operative (MSO) at its Birmingham depot from July 2007. His terms and conditions of employment specified that he worked a basic 35 hours per week made up of seven-hour shifts. He was required to work overtime when necessary. N’s employment was also governed by a local collective agreement which provided for a nine-hour shift pattern. His hours varied day by day in accordance with a weekly roster providing 24-hour cover Monday to Friday and Saturdays until 2pm. N’s contract stipulated that he had to work one Saturday in every three. Any hours in addition to these were said to be voluntary. In practice, N had never worked a seven-hour shift but worked shifts of largely eight-and-a-half or nine hours, with occasional 12-hour shifts.
The additional rostered hours were not taken into account for the purpose of calculating holiday pay. N argued that this was wrong and his holiday pay should be calculated in accordance with his rostered hours since these were the hours he was required to work. He lodged proceedings in the employment tribunal claiming that he had suffered a series of unauthorised deductions from wages in relation to underpayment of holiday pay. He also claimed that the underpayment was a breach of the Working Time Regulations 1998.
F Ltd sought to rely on Bamsey and ors v Albon Engineering and Manufacturing plc 2004 ICR 1083, CA (Brief 756), in which the Court of Appeal held that compulsory but non-guaranteed overtime did not have to be taken into account when calculating a worker’s holiday pay. The Working Time Regulations specify that the amount of a ‘week’s pay’ for the purpose of holiday entitlement is calculated in accordance with Ss.221–224 of the Employment Rights Act 1996. Under those provisions, if a worker’s pay varies from week to week, his or her remuneration is averaged over a 12-week reference period. S.223(3) provides that where that average includes overtime paid at a higher rate of pay, the hourly rate for those hours is reduced to the level of basic pay for the purpose of the calculation. In addition, S.234 stipulates that a worker’s ‘normal working week’ for these purposes is the fixed number of hours he or she has to work before receiving overtime. The Court of Appeal held that S.234 is clearly incorporated into Reg 16, even though it is not expressly provided for.
N contended that the Bamsey position could no longer be sustained in light of the ECJ’s recent judgment in British Airways plc v Williams and ors. The ECJ considered that the EU Working Time Directive (No.2003/88) requires that holiday pay must correspond to a worker’s normal remuneration and should take into account payments which are ‘intrinsically linked’ to the performance of the tasks which the worker is required to carry out under his or her contract of employment. When that case returned to the Supreme Court (British Airways plc v Williams and ors 2012 ICR 1375, SC (Brief 961)) the Court held that pilots’ holiday pay should be calculated by assessing average payments made over a representative reference period, to include their flying pay supplements.
The employment tribunal concluded that it was quite clear from the ECJ’s judgment in Williams that N was entitled to holiday pay that was not based solely on his basic salary. He was entitled to have other components taken into account provided that they were intrinsically linked to the performance of the tasks he was required to carry out under his contract of employment. The work he did as overtime and on weekends all amounted to the performance of tasks that he was required to carry out under his contract of employment. The fact that he may have volunteered to perform those tasks at times outside those that he was contracted to do did not mean that the performance at those times was no longer ‘intrinsically linked’. The same was true of the shift premia that were attached to some of those additional hours.
The tribunal accepted that, if Ss.221-224 ERA were applied to Reg 16, it would result in N receiving less than the average remuneration to which he was entitled. S.223(3) would reduce his average remuneration by reducing the rate of pay for work done outside normal working hours (i.e. overtime) to the normal hourly rate. S.234 would reduce the actual number of hours worked. In order to achieve the result required by the Working Time Directive, the tribunal held that Reg 16(3)(d) of the Working Time Regulations should therefore be construed to read as though the following words had been added: ‘and, in the case of entitlement under regulation 13, sections 223(3) and 234 do not apply’.
This case summary will be replaced with a full report in due course.