Employment Lawyer Says Uncertainty For Businesses Will Continue

A case in the Northern Ireland Court of Appeal this week which considered whether voluntary overtime should be included in the calculation of holiday pay could have far reaching consequences for businesses across the UK.

The case of Patterson -v- Castlereagh Borough Council was initially heard at an Industrial Tribunal in Belfast where it said that voluntary overtime payments should not be included.

This was because the Tribunal concluded that the earlier landmark Bear Scotland & Others -v- Fulton & Others only related to non-guaranteed overtime and not to voluntary overtime.

This was appealed, largely on a technical basis, as Mr Patterson had not made it clear what ‘type’ of overtime he had worked and information about the voluntary nature of it, only arose during cross examination during the hearing itself.

Judgment in the case was reserved (meaning that the Court will consider the arguments and deliver its judgment at a later date) but the Court was asked to deliver it as soon as possible because of the interest in this case and the wide reaching consequences it can have on other similar cases. However it is anticipated that the principle of voluntary overtime being included in holiday pay calculations will be accepted, as long as the characteristics of normal remuneration are satisfied as set down by earlier decisions.

Following this, the focus of legal argument is expected to focus on what constitutes ‘regular’ overtime for the purposes of deciding what is classed as ‘normal remuneration’.  Whilst the Court of Appeal may provide some guidance, the outcome of this particular case will be referred to the Tribunal to determine based on the facts of the case.

Expert Opinion

“Although the outcome of this case is not yet known, the direction of travel suggests that overtime, of whatever nature, that is regularly worked will have to be included in holiday pay. This will include voluntary overtime which the employer is not obliged to offer and the employee does not have to accept.

“If the decision does establish this principle, it seems that employers will still be able to limit the enhanced payments (based upon the overtime worked) to the first 20 days of paid holiday per year.

“We believe that there will continue to be uncertainty in other cases where, for example, the employee works overtime that is not “regular”.

“The court considered this question but these discussions (in this case) considered the pattern of overtime over a number of years. It is perhaps, more likely that employees will seek to argue that “intermittent”, rather than purely “ad hoc”, overtime worked over a 12 month period should also be included. Where this applies, employers will need to consider what reference period to apply to avoid their staff taking holiday (and being paid more) after a short, but intense period of overtime.

“It is clear from these types of questions about what constitutes “normal remuneration” that, even after this case is determined by the NI Court of Appeal, the issue of overtime and holiday pay is far from over and that further guidance from case law will be needed.”
Glenn Hayes - Partner & National Head of Employment Law