Chris Randall

The Employment Appeal Tribunal has handed down its decision in the long awaited case of Dudley Metropolitan Borough Council v Mr G Willetts and Others (UKEAT/0334/16/JOJ).

The EAT has held that entirely voluntary overtime falls within the scope of Article 7 of the Working Time Directive, and therefore within the concept of “normal remuneration” for the purposes of calculating the holiday pay due by regulation 13 of the Working Time Regulations.

The claims were brought by 56 council workers who are employed in various positions to maintain council properties. The claimants are contracted to work for 37 hours a week.

In addition to normal working hours, the claimants also perform additional duties on a voluntary basis, including, among other things, voluntary overtime. The voluntary overtime was not reflected in the claimants’ holiday pay.

The claimants successfully argued before the Employment Tribunal that that pay received for the voluntary overtime with sufficient regularity, should be taken into consideration for the calculation of holiday pay to ensure that employees are not financially disadvantaged by taking leave.

The EAT found in favour of the claimants. By the Working Time Directive, there is no distinction between contractually required work and tasks that are performed voluntarily under other arrangements, because levels of normal remuneration have to be maintained when calculating holiday pay in relation to the guaranteed four weeks of annual leave provided by the Working Time Directive.

The EAT also upheld that where voluntary overtime forms part of normal pay, it should be included in holiday pay calculations so that there is no financial disadvantage that may deter employees from taking leave. The EAT stressed that the pattern of work must continue for a sufficient period of time on a recurring basis to justify the description “normal”.

The President of the Employment Appeal Tribunal, Simler J, said: “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.”

What does this mean for employers?

This is an important decision because it is the first binding decision on this point of law. Many Tribunal claims have been stayed, pending this decision.

Employers should reconsider how they calculate holiday pay, and more importantly, what pay is taken into consideration, to ensure they stay on the right side of the law. This is particularly important in light of the recent decision of the Supreme Court abolishing Employment Tribunal fees.

Potential claimants have historically been deterred from raising holiday pay claims because of the relatively low amounts of money claimed compared with the Tribunal fees of £390. This could see an increase in the number of holiday pay claims.

Wider implications

This decision is also important because of the potential wider implications of the gig economy. If the Respondent had succeeded in its case, it would have meant that workers on zero hours contracts would not have been entitled to paid annual leave because they have no normal remuneration.

A recent tribunal case against Uber has shone the spotlight on the importance and consequences of establishing the status of those engaged in work.

What is status in the context of work?

There exists three types of status for the purposes of rights and protection at work.
Employee. An employee has a contract of employment with their employer and the employee agrees to perform the work personally by the control of the employer.

The employer is obliged to provide the employee with work and the employee is obliged to accept it. A contract, whether verbal or in writing, exists, and maps out terms such as pay, hours, and holidays. Employees benefit from important protections such as the right to unfair dismissal protection; notice pay; redundancy pay; and maternity leave.

Worker. A worker is anyone who agrees to carry out work personally for another person, but is not self – employed. Workers include many casuals, including seasonal workers and agency staff.

Workers do not benefit from the same protection as employees, but they are entitled to the National Minimum Wage, holiday pay, and protection by anti-discrimination law.

Self-employed persons are in business on their own account. They do not benefit from the same protection afforded to employees or workers.

The Uber Case

In Mr Y Aslam and others –v- Uber (case number 2202550/2015): two drivers: Mr Farrar and Mr Aslam, on behalf of 19 drivers, successfully argued that they are engaged as workers, rather than working for themselves. They are therefore entitled to protection from legislation such as the National Minimum Wage, and holiday pay.

The Uber business model is to treat drivers who log onto its app as self-employed contractors, and taking a cut of their fares. Uber unsuccessfully argued that its drivers were self-employed and this was preferable to being employed.

Uber claimed it is a technology business rather than a transport business and that their drivers are in business on their own account. The Judge did not accept these arguments and accused Uber of “resorting in its documentation to fictions, twisted language, and even brand new terminology.”

The tribunal further took the unusual approach of quoting Hamlet to describe Ms Bertram’s (Uber’s Regional General Manager for the UK) protestations of defence: “the lady doth protest too much, methinks”.

What should you do?

This is a ground-breaking decision that will affect thousands of individuals in different industries. It also threatens the gig economy where many individuals are often wrongly classified as self-employed.

As an employer, you should analyse the way individuals are engaged to carry out work on your behalf. A good starting point is to make sure the arrangement is set out in writing by a written contractual agreement.

This is only a starting point because tribunals have the ability to look beyond the contractual arrangement if it does not properly reflect what happens in practice.

The Taylor Review is shortly to be released which is an  independent review into how employment practices need to change in order to keep pace with modern business models. Part of which should address creating clear legal distinctions between employees, the self-employed and workers.

Uber are appealing the Tribunal’s decision and it is listed to be heard by the Employment Appeal Tribunal on September 27 2017.