On Tuesday of this week, the Court of Appeal in Northern Ireland issued its decision in the case of Patterson v. Castlereagh Borough Council, this being the next stop on the now epic journey which the tribunals and courts have taken in trying to determine what should and what should not be accounted for in an employee’s entitlement to holiday pay.
It may be an apt time of year for this decision given the number of people who will now be going on a summer holiday, but the finding of the court may mean that employers will have immediate worries, rather than being able to leave them behind for a week or two.
The issue in Patterson v. Castlereagh Borough Council
Many different aspects of pay have previously been considered in cases relating to paid annual leave entitlement. The particular issue in dispute in the Patterson case was whether previously made payments for voluntary overtime needed to be accounted for. This was an aspect of pay that had not been expressly looked at by the courts in the previous holiday pay cases. In practice, the issue was whether overtime which the employer was not obliged to offer and which the employee was at liberty to refuse could, in theory, fall within the definition of “normal remuneration” so as to create an obligation on employers to take account of such payments (when made within the relevant reference period) when calculating holiday pay.
While the court’s opinion that, in theory, voluntary overtime should be accounted for, the decision itself is perhaps not as helpful in providing a final determination on matters as was hoped.
Previous decisions
As we have covered in our previous blog on the subject, there has been a clear direction of travel in respect of claims raised by employees arguing they have been underpaid in respect of annual leave taken. To summarise where the case law has so far taken us:
Williams V British Airways plc
A worker must receive payment of “normal remuneration” when taking annual leave. This means that any inconvenient aspects of work which are linked intrinsically to the performance of the tasks which the worker is employed to carry out under the terms of his contract of employment and in respect of which a monetary amount is provided which is included in the normal calculation of the worker’s total remuneration must be included when calculating his holiday pay entitlement.
Lock v British Gas
Commission payments which are ordinarily made to employees must be taken account of when calculating holiday pay entitlement.
Bear Scotland Limited and others
Non-guaranteed overtime (which an employer need not absolutely offer but, where it does, must be accepted by the employee) required to be accounted for when calculating holiday pay.
As we have outlined in our previous blog, these decisions relate to the 4 weeks annual leave entitlement provided for under the EU Working Time Directive and not any additional annual leave provided for under the UK’s Working Time Directive or provided for under the employee’s individual contract of employment.
The decision in Patterson
The decision given by the court in Patterson was that, in theory, voluntary overtime may form part of the employee’s entitlement to holiday pay. However, as indicated above, the court’s judgment is not a definitive statement on the law for the following reasons:
- The case was heard by the Northern Ireland Court of Appeal. Decisions of that court are not binding on tribunals and courts situated in the rest of the UK. As such, tribunals and courts and Scotland will not be duty to bound to follow the court’s decision, albeit the judgment is likely to be viewed as highly persuasive.
- Perhaps the biggest problem in placing any real reliance on the judgment is that the court did not hear any real legal argument on the issue in dispute. Rather, in response to Mr Patterson’s appeal on the issue (the Industrial Tribunal who heard the claim determined voluntary overtime should not be accounted for in holiday pay calculations), Castlereagh Borough Council agreed that the tribunal had made an error of law and that voluntary overtime ought to have been accounted for (Mr Patterson’s appeal was resisted on other grounds not relevant for present purposes). As such, in issuing it’s judgment there was no real legal debate or legal analysis of the previous authorities on matters. This does leave the door open for the point to be reviewed in detail in future proceedings.
- Finally, even in arriving at the decision it has, the court did not give an unqualified statement that all and any voluntary overtime must be accounted for when calculating holiday pay. Instead, it stated that each case would be determined on its own circumstances, with particular regard to whether any remuneration due to an employee was “normal” or not. It was noted there is no statutory definition of “normal remuneration” or “normal working hours” so establishing what those concepts would amount to will be a question of fact. The judgment places particular emphasis on what would amount to “normal” working pattern, contrasting a worker who regularly works 4 hours of overtime each week with a worker who works 3 hours of overtime in one particular week.
So, while in theory we have authority (albeit challengeable) that voluntary overtime may be accounted for in calculations of holiday pay, in practice whether such payments do need to be considered will depend on whether or not on the facts of a specific case that voluntary overtime can be found to be “normal”.
Final destination?
Unfortunately, while the Patterson case gives us an answer with regards to voluntary overtime being accounted for in calculations of holiday pay, it isn’t the all encompassing answer most would have hoped for. Accordingly, there may still be plenty of scope for disputes between employers and workers on what payments should be taken account of when an employer calculates holiday pay. There may be some distance left to travel before we arrive at out final destination.
One thing that is worth remembering and which does create some certainty is the now in force Deduction from Wages (Limitation) Regulations 2014. These have the effect of limiting the back period over which a worker can claim backdated underpayment of wage (including holiday pay) to 2 years. These Regulations took effect on 1st July, so any new claims raised by workers will be subject to the 2 year limitation period.
This article is for general information only. Nothing in this article should be taken as legal advice. If you have any queries on the content of this article or need help with any holiday pay issues, please contact us.
