The Dudley Metropolitan Borough Council v Willetts and Others UK EAT case is yet another holiday-pay, working-time-type case that could have huge ramifications.

Mark: Well, in the tail end of 2016 we saw the clear direction of travel for cases involving calculation of holiday pay. There's no doubt that contractually-guaranteed overtime is factored into holiday pay calculation. We knew through the raft of other cases in 2016 that contractually-non-guaranteed overtime that's regularly worked and regularly achieved has to be factored into holiday pay calculation.

The last domino to fall, really, and the one that we've been waiting on in 2017 was whether or not voluntary overtime that was regularly worked had to be calculated into holiday pay calculation. The EAT has now made a decision on that and said, "Yes, they do." So all forms of overtime, effectively, that are regularly worked attract the calculation of holiday pay into that.

Scott: So they're going to be expensive. We've just got a couple of questions coming in here. I am just going to move this laptop so that I can actually read it in front of me here. “Five months ago, we introduced holiday pay calculated over a 12-week average to include overtime. A query arose from an employee who was off sick for six weeks and then took a week's holiday on return.

The employee's average total pay was lower in total than the holiday pay she expected based on the old hourly rate. The employee is querying that we were incorrect that it's in her contract for employment that she would earn £X per hour including holidays and is arguing that we pay her £Y. £Y rate was well above the national minimum wage. Her query is, "Are we in breach of contract?" Surely there is no merit in this.”

Well, is there merit? That's quite complex, that one, actually. You might need to get in touch individually with Mark on that one, but what do you think?

Mark: Yeah. At face value, you would say that the ethos and the direction of travel with regard to holiday pay calculation would infer that any premia that's achieved regularly worked and regularly achieved over, for example, that 12-week referencing period has to be factored into the holiday pay, so there may well be an argument there. The sickness aspect complicates things slightly, but I'd maybe come back with a fuller response.

Scott: Okay. We've another couple of questions coming in. This seems to have struck a nerve for some reason. I don't know what it is. “Has the Employment Appeal Tribunal given any indication as to the calculation to be used regarding voluntary regular overtime and holiday pay, so the periods to be used? What does "normal" or "regular" mean?”

Mark: Well, that's a good question because none of the case law has given us an indication there. They common approach being taken by employment lawyers for the 12-week period that exists under the working time regulations is that I've seen other employers who simply look at their annual overtime rates and the overtime that's worked and simply say, "If there is a degree of consistency in the pattern of people doing the overtime, then that will indicate regularity." Unfortunately – and that's the holy grail of working time and overtime pay holiday pay calculation – the term "regular" isn't given a definitive definition.

Scott: Okay. I think we only have time for one more question. If you do have those questions and you want to send them in, that's fine. We'll try and deal with them, and we'll cover them tomorrow. We'll either get a question and answer email out to you, but you can also link into the webinar on the 2nd of February with O'Reilly Stewart. We'll pass those ones on.

I'll give you one last one here. “We have recently dismissed an employee who has been on sick leave for six years. When we contacted our payroll, they said there was no holiday paid owed. Are we obliged to pay a certain amount of holiday pay even if he hasn't worked for six years?”

Mark: My gut reaction there is no primarily because after six years there would be a question mark over the status of the contract of employment actually existing any longer. Why would an individual still be effectively on the books after six years?

Scott: There could be a number of reasons. It could be that they're on pay protection. It could be that nobody's done anything about it. It could be they're on what we used to call the dead list where they leave them until they die because you don't want to pay them notice and pay them off. Chances are the contract could be frustrated, but you'd have to have a look at that. I certainly wouldn't go out paying whatever it is, 24 weeks' pay, as a result of someone being on sick.

Mark: No, I don't think so. I don't think so.

Scott: Those employees, had they still been on the books, could apply for leave. You can still take your holiday even if you're on sick.

Mark: That's right, and one of the difficulties here is employers are caught in a very, very invidious position primarily because the ethos of the legislation – for example, in the Working Time Regulations – is use it or lose it, but contextually in, for example, long-term sick, as we know, there's an automatic right of carryover.

So the legislation says one thing, the case law says another thing, and unless an employer is well-versed in the differentiation between the two, they can often find that they end up owing people payments that they were automatically entitled to.