The ruling, which marks the first UK interpretation of a European Court of Justice decision, means that all employees working compulsory overtime could be able to claim for additional holiday pay. Only basic pay currently counts towards holiday pay.
Similar rulings are expected to follow on commission payments.
At this stage it is unclear what impact the ruling will have on voluntary overtime, although it is likely that this will be subject to separate test cases.
Unions argued that holiday pay should be included in workers’ salaries as many rely on overtime to top up their salaries.
The case, which related to compulsory overtime, was brought by union Unite against Amec and Hertel and could lead to individual staff pay-outs worth thousands of pounds.
The cases relate to the interpretation of the EU-wide Working Time Directive, which states that employees are entitled to paid holiday. It particularly focuses on the Working Time Regulations implemented in the UK in 1998.
Unite executive director for legal, membership and affiliated services Howard Beckett said: “Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to.
“This ruling not only secures justice for our members who were short-changed, but means employers have got to get their house in order.
“Employers will now have to include overtime in calculating holiday pay, and those that don’t should be under no illusion that Unite will fight to ensure that our members receive their full entitlement.
The ruling could have major implications for all companies that pay staff compulsory overtime.
While there had been fears that claims could be backdated as far back as 1998, it emerged after the initial ruling that claims for backdated holiday pay are expected to be limited to the previous leave year. In many cases, claims will be limited to backdated holiday pay for the previous three months.
But a final decision on the ruling could be years away as it is likely to be appealed to the Court of Appeal, or referred to EU courts in Luxembourg.
Update: In an earlier version of this article it was understood that the ruling applied to voluntary overtime, however, it has since emerged that at this stage it only applies to compulsory overtime. Sorry for any confusion.
