The EAT has delivered a significant judgment further clarifying the law on holiday pay which will be of interest to employees and employers throughout the UK.

The lead claimants were part of 56 employees employed as plumbers, electricians, roofers and storemen and were responsible for the repair and improvement of council-owned housing stock. They each had contractual working hours but performed on-call duties and additional overtime work (which fell outside their contract of employment) when the opportunity arose.  The claimants argued the remuneration linked to their voluntary overtime should be taken into account when calculating holiday pay. The ET emphasised the additional work was entirely voluntary, stating it was “almost entirely at the whim of the employee, with no right to enforce work on the part of the employer”.
Relying on the CJEU judgments in British Airways plc v Williams and Lock v British Gas Trading Ltd, the appellant Council argued payments for voluntary overtime did not constitute ‘normal remuneration’ for the purposes of calculating holiday pay as they lacked the necessary intrinsic link between payment and the performance of duties outlined in their contracts of employment. The Advocate General had previously expressed the Opinion in Williams that a narrow interpretation could have a negative effect on workers, explaining it could lead to employers imposing artificially low basic salaries in an attempt to deny employees their entitlement to paid annual leave.

The EAT held in Dudley there was no error of law and dismissed the appeal by the Council. It concluded voluntary overtime was within the remit of Article 7 of the Working Time Directive (WTD) and formed part of the employee’s “normal remuneration” when calculating holiday pay.
The Tribunal emphasised the right to paid annual leave is a key principle of EU social law, enshrined in Article 31 (2) of the Charter. EU law requires normal remuneration to be maintained in respect of the 4 week period of annual leave guaranteed by Article 7 of the WTD. This is to ensure an employee is not financially disadvantaged and not discouraged from taking annual leave in the future.

The EAT stressed the intrinsic link between pay and the performance of duties under a contract of employment is a decisive criterion yet not the sole, deciding factor and “absence of such an intrinsic link does not automatically exclude such a payment from counting”. The EAT confirmed the test was satisfied, asserting that once the claimants commenced working a shift of voluntary overtime they were performing the tasks required of them as specified in their contracts. The payments were directly linked to their assigned tasks and as such formed part of their normal remuneration.
So, what is 'normal'? That, according to the President of the EAT, sitting alone, is a matter of fact for the tribunal to determine but should not be an onerous task and it should be fairly obvious:
"The focus in Article 7 is on normal remuneration and not the normal working week.  As already indicated, whether a payment is normal is a question of fact and degree.  Questions of frequency and regularity are likely to play a part in determining whether a payment is normal because a payment that is made on a regular basis suggests that it is a “systemic component” of remuneration (see paragraph 86 of the Advocate General’s Opinion in Williams) that is usually or normally paid...
 
"Moreover, I see no difficulty in principle in concluding that a payment is normally made if paid over a sufficient period of time on a regular basis, say for one week each month or one week in every five weeks, even if it is not paid more frequently or even each week.  These are questions of fact for a tribunal and here, in my judgment, the Tribunal was entitled to find that pay for working on this basis was part of normal remuneration.  It was neither exceptional nor unusual.  Fluctuations in the amount paid would be catered for by the 12 week average...
 
"Nor do I accept that as a matter of law, if workers have the opportunity to take annual leave in weeks with no overtime or out of hours shifts, this means they are not deterred from taking holiday by the failure to include within normal remuneration for paid leave pay for such overtime or out of hours shifts.  A deterrent effect is inferred from a reduction in remuneration rather than from actual evidence that a worker has not taken annual leave.  The real question is whether normal remuneration is maintained in respect of annual leave guaranteed by Article 7.  If it is not, a deterrent effect is presumed irrespective of the opportunity the worker had to take annual leave at a different time or suffered a financial loss as a result of taking annual leave when he or she did."
http://www.bailii.org/cgi-bin/format.cgi?doc=/uk/cases/UKEAT/2017/0334_16_3107.html&query