The employees in this case worked for the Council in a variety of roles and each had set contractual hours. They also volunteered to perform additional duties, not required under their contracts of employment, and were paid overtime for these, in addition to their standard rate of pay.

EU legislation dictates that workers are entitled to a minimum of four weeks holiday, and that their pay for that period must correspond with their ‘normal remuneration’.

The Council did not include any overtime pay in the employees’ holiday pay. They argued that the payments for overtime should not be classed as ‘normal remuneration’, because they lacked the intrinsic link to the performance of tasks required under the employees’ contracts of employment.

The employees’ case was that this was wrong, and that payments for the regular overtime they worked should have been included within the first four weeks holiday entitlement they had. This was on the basis that the overtime payment they received on a regular basis should be classed as part of their ‘normal remuneration’. The EAT, in Dudley Metropolitan Borough Council v Willets, agreed. It held that the overtime payments should be classed as normal remuneration. For a payment to be classed a ‘normal remuneration’, it must have been paid over a sufficient period of time. In addition to this, the payment must have been made frequently and regularly.

The employees were paid overtime payments over a period of years for 1 week in every 4 or 5 weeks. This was considered a sufficient period to class the payments as ‘normal remuneration’. Unfortunately, the EAT did not provide any real guidance as to what regularity and frequency of overtime payments would be required for them to be classed as ‘normal remuneration’, and there may well be further litigation in this area.

Employers should review workers’ overtime payments, and any other payments made to their workers, outside their normal contractual pay. They should consider, in light of this case, whether these payments should be classed as ‘normal remuneration’.

For more information, please contact Nia Cooper.

To read the rest of this month's newsbytes, please see here