Voluntary overtime can, in principle, be included for the purposes of calculating holiday pay in Northern Ireland. That was the conclusion of the Northern Ireland Court of Appeal who delivered judgment in the Patterson v Castlereagh Borough Council (Patterson) case today, 26 June.

Employers in Great Britain should also be aware of the potential wide-reaching implications of this decision.  Although decisions of the Court of Appeal in Northern Ireland are not binding on the Courts in the rest of the UK it will undoubtedly be a highly persuasive authority.

Facts

Mr Patterson is employed by Castlereagh Borough Council on two concurrent contracts, one as a relief/casual worker and the other a full time contract of employment as an Assistant Plant Engineer. He alleged unauthorised deduction from wages in relation to holiday pay, in respect of both his relief/casual work and overtime work conducted under the full time contract of employment. Part of the employer’s defence was that this overtime was not compulsory, but overtime that Mr Patterson had volunteered to perform. Mr Patterson is the lead claimant in a multiple claim pursued against the Council.

At first instance, the Northern Ireland Industrial Tribunal ruled that the Working Time Directive does not require voluntary overtime to be taken into account when calculating holiday pay, relying on the Bear Scotland decision. This ruling was appealed on the basis that the Tribunal misdirected itself in applying Bear Scotland because that case made no findings on the issue of voluntary overtime.

The compulsory/voluntary overtime distinction

Since the Bear Scotland decision, a distinction has been made between “compulsory” and non-guaranteed overtime (which do count towards holiday pay) and voluntary overtime. The issue of voluntary overtime did not arise in the facts of the Bear Scotland case and so the issue was left undecided. Many employers have since sought to rely on this apparent distinction, to justify a different approach to calculating holiday pay in respect of compulsory and non-guaranteed overtime,  and voluntary overtime.

The decision

The Northern Ireland Court of Appeal concluded that the Industrial Tribunal was in error in relying on its interpretation of Bear Scotland. In principle there is no reason why voluntary overtime cannot constitute part of “normal” remuneration. The question of what constitutes “normal” remuneration is a matter of fact for the Tribunal in each case and should be assessed over a reference period. The reference period was not identified by the Northern Ireland Court of Appeal. Mr Patterson’s case was remitted to the Tribunal to hear further evidence of the overtime actually worked and to detemine whether it formed part of normal remuneration

Impact of the decision

Northern Ireland Court of Appeal decisions are not binding on Courts and Tribunals in England, Wales and Scotland. However, decisions can be cited as ‘persuasive’ and as employees and unions have been keeping a close eye on this case it will no doubt be seen as support for similar claims in the rest of the UK.

It is worth noting that voluntary overtime will have to be undertaken with sufficient regularity to constitute part of a worker’s normal working hours and there will hopefully be some practical guidance on this once the Pattersoncase is remitted to the Tribunal.

Limit on back pay

The decision in Patterson puts the issue of holiday pay firmly back in the spotlight at a timely moment. Next week, 1 July 2015 marks the introduction of the two year cap on back pay in holiday claims. Claims submitted after this date will only be able to claim a maximum of two years’ back pay , although in reality many claimants will only be able to claim for the current holiday year in any event. As the deadline draws closer, the Employment Tribunal Service predicts a short term spike in the number of claims lodged in the next few days as employees rush to submit their claims before the changes take effect.