A tribunal in Northern Ireland rejected a council engineer’s claim of unlawful deductions from wages, and concluded that voluntary overtime should not be included in holiday pay.
In the case of Patterson v Castlereagh Borough Council, Mr Patterson brought the claim forward on the basis that the calculation of his holiday pay should have included pay for overtime hours that he volunteered to work.
The appeal was heard at the Royal Courts of Justice in Belfast on 17 June and the Employment Appeal Tribunal (EAT) held that regular non-guaranteed overtime should be included in holiday pay calculations, but the question of “voluntary” overtime was left unclear.
It was found that, although the employee’s 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.
Previous cases
Patterson’s circumstances were found to differ from workers in the key 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 employees 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.
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.
Conclusions
It is understood that at the appeal hearing, the Northern Ireland Court of Appeal judges expressed surprise at the tribunal’s assumption that purely voluntary overtime does not need to be included in holiday pay. The employer’s legal representatives accepted that there is “nothing in principle” to prevent purely voluntary overtime from counting towards holiday pay in appropriate circumstances.
On appeal, the Northern Ireland Court of Appeal overturned the tribunal’s decision. It accepted the employer’s concession, 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.
If the appeal is allowed then the case will be remitted to the employment tribunal to determine whether, based on the nature of the overtime, it should be included in holiday pay.
The Northern Ireland Court of Appeal’s judgment, released on 26 June, 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 does 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.
At the Northern Ireland employment tribunal the employee’s claim for unlawful deductions from wages claim was rejected. The nature of the overtime was that the employer was not obliged to offer it and the employee was not required to take overtime offered.
The case will be resubmitted to the tribunal to hear further evidence of Mr Patterson’s overtime arrangements.
Possible impact
As it is a Northern Ireland-based case, this decision is not binding for courts and tribunals in England, Wales and Scotland. However, it may be cited in holiday pay cases in those jurisdictions and may be persuasive.
Nick Howard, employment law specialist at Norton Rose Fulbright, said: “The Northern Irish Court of Appeal has decided that, for the purposes of Northern Irish law at least, amounts paid by way of voluntary overtime are capable of amounting to “normal remuneration” meaning that they should, depending upon the particular facts, be taken into account for the purposes of the calculation of holiday pay.
“This decision is not binding on English Employment Tribunals, but is likely to be persuasive authority.
“The court unfortunately did not provide guidance on the tests for determining whether voluntary overtime should, in any particular circumstances, be included in the calculation of holiday pay and indeed stressed that this will be a question of fact in each case (leaving uncertainty for employers).
“There will, no doubt, be further case law on the point, and employers should also expect case law on the circumstances in which various forms of performance bonus should be taken into account in the calculation of holiday pay.”
Jean Lovett, employment and incentives partner at law firm Linklaters, said: “The result isn’t surprising given recent cases but, until there is further guidance from the courts, it leaves employers with some uncertainty about how to treat voluntary overtime when doing holiday pay calculations.”