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England and Wales Court of Appeal (Civil Division) Decisions
You are here: BAILII >> Databases >> England and Wales Court of Appeal (Civil Division) Decisions >> East of England Ambulance Service NHS Trust v Flowers & Ors  EWCA Civ 947 (10 June 2019)
Cite as:  IRLR 798,  ICR 1454,  WLR(D) 320,  EWCA Civ 947
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ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HONOURABLE MR JUSTICE SOOLE
Strand, London, WC2A 2LL
B e f o r e :
LADY JUSTICE ASPLIN
LADY JUSTICE NICOLA DAVIES
| EAST OF ENGLAND AMBULANCE SERVICE NHS TRUST
|- and -
|NEIL FLOWERS AND OTHERS
Sean Jones QC (instructed by UNISON Legal Services) for the Claimants
Hearing date: 15th May 2019
Crown Copyright ©
Lord Justice Bean:
"21. None of the Claimants are or have ever been required or expected to volunteer for overtime shifts and all of the Claimants are and have always been completely free to choose whether or not to work any voluntary overtime shifts."
The contractual claim
"13.9 Pay during annual leave will include regularly paid supplements, including any recruitment and retention premia, payment for work outside normal hours and high cost area supplements. Pay is calculated on the basis of what the individual would have received if he or she had been at work. This would be based on the previous three months at work or any other reference period that may be locally agreed."
"30. ... First, I consider that the purpose of the first sentence of clause 13.9 is to provide that holiday pay shall include the identified "regularly paid supplements". It does not expressly define the other components of "pay".
31. Secondly, I see no good reason to construe the references to "pay" in a way which confines it to basic pay and excludes overtime. The natural interpretation that overtime is part of pay and the pay structure is confirmed by clause 2.9 of section 1, which provides the link to the overtime provisions in section 3.
32. Thirdly, such construction of "pay" is further supported by the second sentence of clause 13.9. The clause must be read as a whole. Its objective intention is to maintain the overall level of remuneration which the employee would have received if working. I do not accept that the second sentence merely provides calculation machinery for the first sentence. However, even if it is so confined, that calculation is of pay which includes overtime pay.
33. Fourthly, this construction accords with the background context of the WTD. I was told that clause 13.9 appeared in its current form in 2009. As Simler P's analysis in Dudley demonstrates, the European Court had by at least 2006 established the principle that, for the duration of annual leave within the meaning of the Directive, remuneration must be maintained: paragraph 60 of her judgment. It makes obvious sense for the contract to march in step with the WTD so far as possible.
34. Fifthly, I do not accept that the Claimants' case involves a rewriting of the contract. It is a question of construction. In my judgment there is no good basis to construe clause 13.9 so as to exclude overtime in the calculation of holiday pay.
35. In consequence of this construction and contrary to the Tribunal's conclusion, I see no basis to distinguish between non-guaranteed and voluntary overtime. In this case, the calculation will be based on the three-month period identified in the final sentence of clause 13.9."
"The [Trust] submits that paragraph 13.9 means that employees will be entitled to pay during their holiday and then set out additional elements of pay which will be taken into account. Thus, when the paragraph says "pay during annual leave will include…", it sets out the elements which should be taken into account in addition to basic pay".
"It was common ground that overtime was not a regularly paid supplement. The [Trust] submits that it follows that, not being a regularly paid supplement, overtime payments do not fall to be taken into account in the calculation of holiday pay".
"… it is submitted that what is even more compelling is that the parties have expressly included some types of payment and, not withstanding that overtime is identified in the contract as a form of payment, it has been omitted from paragraph 13.9. Thus the drafters of the contract went back through the contract and identified types of payment falling within sections 2, 4 and 5 as being taken into account in the calculation of holiday pay but they conspicuously glossed over and did not mention section 3 – overtime – as a type of payment which should be taken into account. The Claimants' argument that paragraph 13.9 means that overtime should be taken into account in determining holiday pay is a type of payment which has deliberately not been mentioned."
The Working Time Directive claim
"20. The purpose of the requirement of payment for that leave is to put the worker, during such leave, in a position which is, as regards remuneration, comparable to periods of work: see Robinson-Steele, para 58 and Stringer, para 60.
21. As the Advocate General states in point 90 of her opinion, it follows from the foregoing that remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker. It also follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European Union law.
24. Accordingly, any inconvenient aspect which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided which is included in the calculation of the worker's total remuneration, such as, in the case of airline pilots, the time spent flying, must necessarily be taken into account for the purposes of the amount to which the worker is entitled during his annual leave.
25. By contrast, the components of the worker's total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks which the worker is required to carry out under his contract of employment, such as costs connected with the time that pilots have to spend away from base, need not be taken into account in the calculation of the payment to be made during annual leave.
26. In that regard, it is for the national court to assess the intrinsic link between the various components which make up the total remuneration of the worker and the performance of the tasks which he is required to carry out under his contract of employment. That assessment must be carried out on the basis of an average over a reference period which is judged to be representative ..."
"Although the amount of commission may fluctuate from month to month … such commission is nonetheless permanent enough for it be regarded as forming part of that worker's normal remuneration. In other words, it constitutes a constant component of his remuneration. …
In my view an intrinsic link does therefore exist between the commission received each month by a worker such as Mr Lock and the performance of the tasks he is required to carry out under his contract of employment."
"26 In this respect, it should be observed at the outset that remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond to the normal remuneration received by the worker (see Williams and Others EU:C:2011:588, paragraph 21).
27 Where the remuneration received by the worker is composed of several components, the determination of the normal remuneration to which the worker in question is entitled during his annual leave requires a specific analysis (see Williams and Others EU:C:2011:588, paragraph 22).
28 As stated at paragraph 7 above, that is the case regarding Mr Lock's remuneration. As a sales consultant employed by a commercial company, he receives remuneration composed of a fixed monthly salary and variable commission linked to the contracts entered into by the employer resulting from sales he achieves.
29 In any specific analysis, for the purpose of the case-law cited above, it is established that any inconvenient aspect which is linked intrinsically to the performance of the tasks which the worker is required to carry out under his contract of employment and in respect of which a monetary amount is provided and included in the calculation of the worker's total remuneration must necessarily be taken into account for the purposes of calculating the amount to which the worker is entitled during his annual leave (see Williams and Others EU:C:2011:588, paragraph 24).
30 In addition, the Court has stated that all components of total remuneration relating to the professional and personal status of the worker must continue to be paid during his paid annual leave. Thus, any allowances relating to seniority, length of service and to professional qualifications must be maintained (see, to that effect, Case C-471/08 Parviainen EU:C:2010:391, paragraph 73, and Williams and Others EU:C:2011:588, paragraph 27).
31 By contrast, according to that same line of case-law, the components of the worker's total remuneration which are intended exclusively to cover occasional or ancillary costs arising at the time of performance of the tasks which the worker is required to carry out under his contract of employment need not be taken into account in the calculation of the payment to be made during annual leave (see Williams and Others EU:C:2011:588, paragraph 25).
32 In the case in the main proceedings, as the Advocate General observed at points 31 to 33 of his Opinion, the commission received by Mr Lock is directly linked to his work within the company. Consequently, there is an intrinsic link between the commission received each month by Mr Lock and the performance of the tasks he is required to carry out under his contract of employment.
33 It follows that such commission must be taken into account in the calculation of the total remuneration to which a worker, such as the applicant in the main proceedings, is entitled in respect of his annual leave."
"44. Despite the subtlety of many of the arguments, the essential points seem relatively simple to me. "Normal pay" is that which is normally received. As Advocate General Trstenjak observed in Williams, there is a temporal component to what is normal: payment has to be made for a sufficient period of time to justify that label. In cases such as the present, however, where the pattern of work is settled, I see no difficulty in identifying "normal" pay for the purposes of EU law and accept that, where there is no such "normal" remuneration, as average taken over a reference period determined by the member state is appropriate. Accordingly, the approach taken in Williams is unsurprising. The court in Lock looked for a direct link between the payment claimed and the work done. In the Hertel and Amec cases, the work was required by the employer. On the evidence, the employment tribunal was entitled to think it was so regularly required for payments made in respect of it to be normal remuneration.
45. In so far as the test seeks an intrinsic or direct link to tasks which a worker is required to carry out (stressing those last four words) it would be perverse to hold that overtime in these cases was not. In my view, therefore, article 7 requires and required non-guaranteed overtime to be paid during annual leave. I see no scope for any such uncertainty as would persuade me to make a reference to the Court of Justice".
"36. There is no doubt that the right to paid annual leave is a particularly important principle of EU social law, enshrined in Article 31(2) of the Charter. There is no provision for its derogation in the WTD. Recital 6 to the WTD requires account to be taken of the principles of the ILO Convention with regard to the organisation of working time. The ILO has adopted paragraph C132 which is the source of the requirement that the full period of holiday to which a worker is entitled should be paid at a rate that is "at least his normal or average remuneration". There is also no doubt that payments in respect of overtime (whether that be compulsory, non-guaranteed or voluntary), constitute remuneration as a matter of domestic and EU law.
37. EU law requires that normal (not contractual) remuneration must be maintained in respect of the four-week period of annual leave guaranteed by Article 7. That overarching principle means that the payments should "correspond to the normal remuneration received by the worker" while working: see Williams and Lock. The purpose of this requirement is to ensure that a worker does not suffer a financial disadvantage by taking leave, which is liable to deter him from exercising this important right from which there can be no derogation.
38. It follows in my judgement, that the CJEU in Williams, having expressly endorsed the conclusion of the Advocate General at paragraph 90.2, did not purport to set a narrower test at paragraph 24 of its judgment that would have the effect of restricting the application of the overarching principle.
39. Having set out the overarching principle, the CJEU made clear that the division of pay into different elements cannot affect a worker's right to receive "normal remuneration" in respect of annual leave. In each case the relevant element of pay must be assessed in light of the overarching principle and objective of Article 7 which is to maintain normal remuneration so that holiday pay corresponds to (and is not simply broadly comparable to) remuneration while working (paragraphs 22 and 23).
40. Further, for a payment to count as "normal" it must have been paid over a sufficient period of time. This will be a question of fact and degree. Items which are not usually paid or are exceptional do not count for these purposes. But items that are usually paid and regular across time may do so.
41. Read in that light, paragraph 24 of Williams is unsurprising and simply reflects the Court's assessment of the specific payments at issue in that case as examined in light of the overarching principle. That is reinforced by the reference to "inconvenient aspects" which were directly relevant to the two payments at issue. Paragraph 24 does not however, set a sole or exclusive test of "normal remuneration" dependent on a link between pay and the performance of duties undertaken under compulsion of the contract of employment. Nor does it restrict the application of the overarching principle. If there is an intrinsic link between the payment and the performance of tasks required under the contract that is decisive of the requirement that it be included within normal remuneration. It is a decisive criterion but not the or the only decisive criterion. The absence of such an intrinsic link does not automatically exclude such a payment from counting. That is supported by the fact that payments that are personal to the individual such as those relating to seniority, length of service and professional qualifications also count for normal remuneration purposes even though they are not necessarily linked to performance of tasks the worker is required to carry out under the contract of employment or to inconvenient aspects of such tasks.
42. Mr Jones' argument [for the employers] places too much weight on the reference to tasks required to be carried out under the contract of employment. This was not an issue in Williams or Lock. In Williams the court was deciding whether the payments were intrinsically linked to work done by the claimants for the employer or whether they reimbursed expenses incurred by them; and not to whether the work was compulsorily required under the contract or done on a voluntary basis. Furthermore at paragraph 32 of Lock in particular, the CJEU appears to treat work within the company as synonymous with the performance of tasks required to be carried out under the contract of employment.
43. Furthermore, the exclusion as a matter of principle of payments for voluntary work which is normally undertaken would amount to an excessively narrow interpretation of normal remuneration that gives rise to the risk of fragmenting of pay into different components to minimise levels of holiday pay. It would result in a risk of a worker suffering a financial disadvantage that might deter him from exercising these rights contrary to the underlying objective of Article 7. It would carry the risk identified by Advocate General Trstenjak of employers setting artificially low levels of basic contracted hours and categorising the remaining working time as "voluntary overtime" which does not have to be accounted for in respect of paid annual leave. This is not a fanciful but a real objection to the Respondents' argument as demonstrated by the current proliferation of zero hours contracts.
44. It seems to me that applying the overarching principle established by the CJEU in Williams and Lock, in a case where the pattern of work, though voluntary, extends for a sufficient period of time on a regular and/or recurring basis to justify the description "normal", the principle in Williams applies and it will be for the fact-finding tribunal to determine whether it is sufficiently regular and settled for payments made in respect of it to amount to normal remuneration.
45. Accordingly, the Employment Tribunal in the present case made no error of law in finding that remuneration linked to overtime work that was performed on a voluntary basis could be included in normal remuneration for calculating holiday pay.
46. If I am wrong and there is a requirement of an intrinsic link, the link is between the payment in question and tasks which a worker is required to carry out under his contract of employment, and I consider that this test is satisfied here. Absent a contract of employment, the specific agreement or arrangement made for voluntary overtime would not exist. The duties or tasks carried out in either case are the same. It seems to me that the contract of employment constitutes an umbrella contract in that sense. Whatever the position in advance of a particular shift, it seems to me that once the Claimants commenced working a shift of voluntary overtime or a period of standby duty or callout, they were performing tasks required of them under their contracts of employment even if there was also a separate agreement or arrangement. The payments made were all directly linked to tasks they were required to perform under their contracts of employment and, once those shifts or standby periods began, they were in no different position from an employee who is required by his contract to work overtime or be on standby or attend callouts."
"… the purpose of normal remuneration being received during the period of paid annual leave is to allow the work to actually take the days of leave to which he is entitled… when the remuneration paid on account of the entitlement to paid annual leave provided for by Article 7(1) of Directive 2003-88 is, as in the situation at issue, in the main proceedings, less than the normal remuneration that the worker receives during periods actually worked, the worker might well be encouraged not to take his paid annual leave, at least during periods of actual work, as it would lead to a reduction in his remuneration during those periods."
"46. Lastly, as for the rule that overtime worked by the worker is to be taken into account for the purpose of calculating the remuneration due in respect of paid annual leave entitlement, it should be noted that, given its exceptional and unforeseeable nature, remuneration received for overtime does not, in principle, form part of the normal remuneration that the worker may claim in respect of the paid annual leave provided for in Article 7(1) of Directive 2003/88.
47. However, when the obligations arising from the employment contract require the worker to work overtime on a broadly regular and predictable basis, and the corresponding pay constitutes a significant element of the total remuneration that the worker receives for his professional activity, the pay received for that overtime work should be included in the normal remuneration due under the right to paid annual leave provided for by Article 7(1) of Directive 2003/88, in order that the worker may enjoy, during that leave, economic conditions which are comparable to those that he enjoys when working. It is for the referring court to verify whether that is the case in the main proceedings."
"In principle the broad definition of pay in Article 141(2) EC covers not only the remuneration payable strictly as consideration for the work undertaken but also any additional components such as bonuses, supplements and allowances, concessions granted by the employer and ex gratia payments. The court has certainly recognised as pay, within the meaning of that provision, allowances based on the criterion of mobility, that is to say, allowances which reward the worker's readiness to work at different times."
Consequently an allowance for inconvenient working hours …, overtime pay… and overtime pay for training course attendance, the duration of which exceeds the individual's working hours … have also been regarded as coming within the scope of that definition. Logically then, that category would necessarily also include pay supplements for overtime, supplements for working on public holidays, shift allowances and any comparable payments."
"The fact that a right to the supplements normally payable is recognised as being enforceable on the merits does not necessarily mean that the worker has an undiminished right to all conceivable supplements. In my view, the court imposed a limit on that right, insofar as the case law can also be interpreted as meaning that the worker is to be entitled to no more than his "normal remuneration".
She went on to note that the determination of normal remuneration requires a sufficiently representative reference period.
"Remuneration paid in respect of annual leave must, in principle, be determined in such a way as to correspond with normal remuneration received by the worker. It… follows that an allowance, the amount of which is just sufficient to ensure that there is no serious risk that the worker will not take his leave, will not satisfy the requirements of European law."
Lady Justice Asplin:
Lady Justice Nicola Davies: