Holiday pay: voluntary overtime should be included, rules appeal court

There is no reason in principle why voluntary overtime should not be included in holiday pay, according to an important judgment published today by the Northern Ireland Court of Appeal.

Holiday pay: cases on appeal

Cases on appeal Keep track of appeals in important employment cases, including those relating to holiday pay.

In Patterson v Castlereagh Borough Council, a Northern Ireland tribunal rejected a council engineer’s unlawful deductions from wages claim.

Mr Patterson brought the claim on the basis that the calculation of his holiday pay should have included pay for overtime hours that he volunteered to work.

Although his contract of employment did not mention overtime, it was clear that the employer was not obliged to offer overtime, nor was Mr Patterson required to undertake it when it was offered.

Mr Patterson’s circumstances were different from the workers in the key Employment Appeal Tribunal (EAT) case Bear Scotland Ltd and others v Fulton and others; Hertel (UK) Ltd v Woods and others; Amec Group Ltd v Law and others.

In Bear Scotland, the workers were not guaranteed to receive overtime, but they were required to work overtime when their employers asked them to do so. The EAT said that obligatory non-guaranteed overtime has to be included in holiday pay.

In contrast to the workers in Bear Scotland, Mr Patterson’s overtime was purely voluntary.

Following Bear Scotland, employers were left with the question as to whether the principles set out in that case apply to circumstances in which workers are not required to work overtime when asked by their employer.

The industrial tribunal in Patterson v Castlereagh Borough Council applied Bear Scotland and concluded that, since Mr Patterson’s overtime was “voluntary overtime” and not obligatory “non-guaranteed overtime”, the employer was not required to include the overtime in the calculation of his paid annual leave.

On appeal, the Northern Ireland Court of Appeal overturned the tribunal’s decision. It accepted the employer’s concession that there is nothing in principle to prevent purely voluntary overtime from counting towards holiday pay in appropriate circumstances.

However, the employer’s side maintained that each case needs to be decided on its facts, depending on factors such as the regularity and permanence of the overtime arrangement.

The Northern Ireland Court of Appeal has now issued its written judgment in the case allowing the appeal, in the light of the employer’s concession.

The judgment states that the employer was correct to concede that there is no reason in principle why voluntary overtime should not be included in holiday pay calculations.

However, it goes on to stress that it will be a question of fact for each tribunal to determine whether or not the voluntary overtime includes the necessary features to be included. The overtime must normally be carried out by the worker, and be an “appropriately permanent feature” of the worker’s remuneration to trigger its inclusion in the holiday pay calculation.

As it is a Northern Ireland case, this decision is not binding on courts and tribunals in England, Wales and Scotland. However, it will be cited in holiday pay cases in those jurisdictions and may be persuasive.

The case will be resubmitted to the tribunal to hear further evidence of Mr Patterson’s overtime arrangements.

Continue reading for further analysis of the judgment and the possible implications for employers on XpertHR…

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