Holiday pay: ‘nothing in principle’ to prevent inclusion of voluntary overtime

In a NIPSA Union supported case of Patterson v Castlereagh Borough Council, in which MTB Solicitors acted for the Appellant in the Court of Appeal, the Council admitted there was “nothing in principle” blocking the inclusion of voluntary overtime from counting towards holiday pay. This is because recent case law on the calculation of holiday pay did not consider whether or not the inclusion of pay for overtime in paid annual leave extends to purely voluntary overtime, where the work may be offered, but where the worker can choose whether or not to work it.

In Bear Scotland Ltd and Others v Fulton and Others; Hertel (UK) Ltd v Woods and Others; Amec Group Ltd v Law and Others, the Employment Appeal Tribunal (EAT) held that regular non-guaranteed overtime should be included in holiday pay calculations.

In Bear Scotland, the overtime work was related to tasks that the workers were required to carry out under their contracts of employment, but where there was no obligation on the employers to offer overtime.

One of the big questions that was left after the EAT’s decision was whether or not the principles set out applied to circumstances in which workers are not required to work overtime.

In the decision of Patterson v Castlereagh Borough Council, delivered after the EAT judgment in Bear Scotland, an Industrial Tribunal rejected the unlawful deductions from wages claim brought by Mr Patterson, an engineer who worked for Castlereagh Borough Council. Although his contract of employment was silent on overtime, it was clear that the employer was not obliged to offer overtime, nor was Mr Patterson required to undertake overtime when it was offered. The claim was rejected because the Industrial Tribunal’s interpretation of the decision in Bear Scotland was that the EAT had decided that voluntary overtime, as opposed to non-guaranteed overtime, should not be included in the calculation of holiday pay.

At the appeal hearing the Court of Appeal expressed surprise at the Tribunal’s assumption that purely voluntary overtime does not need to be included in holiday pay.

The employer accepted that there is “nothing in principle” to prevent purely voluntary overtime from counting towards holiday pay in appropriate circumstances.

However, the employer maintained that each case needs to be decided on its facts, depending on key components as to what constitutes “normal remuneration” i.e. the regularity and permanence of the overtime arrangement.

The Court of Appeal upheld Mr. Patterson’s appeal. It held that the Industrial Tribunal had erred in finding that voluntary overtime could not be included in statutory holiday pay and remitted the case the Industrial Tribunal to consider further evidence of the overtime actually worked by Mr Patterson. This was be the first decision at an appeal level in Northern Ireland and Great Britain which directly addresses the issue of voluntary overtime and its interplay with the calculation of holiday pay. However, as Winston Churchill said, “Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning”.

The area of focus, regarding voluntary overtime, will now turn to a consideration of the facts in each particular case as to whether the manner in which the voluntary overtime is worked meets the components of the normal remuneration test. More case law will be needed to assist with determining the intended meaning of each component of the normal remuneration test.

If your employer has not included your regular overtime payments when calculating your holiday pay or, alternatively, you are an employer concerned about the ramifications of this decision, please contact John McShane at MTB Solicitors on telephone number 02890 329801 or email : john.mcshane@mtb-law.co.uk for further advice.