Voluntary Overtime – NI Court of Appeal suggests it may need to be included in calculating holiday pay after all

Given the pace that decisions on holiday pay are moving, it almost seems like old news that non-guaranteed overtime payments should be included in the calculation of holiday pay. The position on voluntary overtime - that is overtime that the employer is not obligated to provide nor the employee to accept - was considered today by the Northern Ireland Court of Appeal in Patterson -v- Castlereagh Borough Council. Having attended the hearing today it seems that voluntary overtime may indeed need to be included in holiday pay calculations albeit we will need to wait a little longer before receiving the Court of Appeal's Judgment on the issue.

The journey so far

At first instance the Industrial Tribunal in Belfast held definitively that voluntary overtime should not be included in holiday pay calculations in Patterson. This was because the Tribunal considered that the EAT in Bear Scotland & Others -v- Fulton & Others had decided that voluntary overtime, as opposed to non-guaranteed overtime, should not be included in the calculation of holiday pay. This appeared to be good news for employers. However the decision was quickly appealed to the Court of Appeal (we do not have an Employment Appeal Tribunal in Northern Ireland). The appeal was heard by the NI Court of Appeal today with Lord Justice Girvan presiding.

The condensed arguments before the Court of Appeal today

The Respondent to the appeal (the Council) conceded that the Tribunal may have got it wrong at first instance. Leading Counsel submitted that the Claimant's claim concerning voluntary overtime only emerged during the cross examination of Mr Patterson at the first instance hearing. He argued that because the allegation had been introduced mid-hearing, without being expressly pleaded and without evidence being adduced on the amount of voluntary overtime worked, the regularity of such overtime or the nature of the overtime, "the Tribunal was starved of the necessary evidence to make a meaningful decision on liability."

Leading Counsel for the Respondent went on to concede that there is nothing in principle that stops voluntary overtime falling to be included within the calculation of holiday pay, but only if such voluntary overtime satisfies the key components as to what constitutes "normal remuneration" as set down in the earlier decisions of Lock, Williams and Bear Scotland. As Leading Counsel put it, "it doesn't matter what species of overtime it is, [meaning guaranteed, non-guaranteed or voluntary overtime] provided it satisfies the characteristics of normal remuneration."

The Appellant's Counsel had a relatively easy job to persuade the Court to review the issue itself, rather than simply remitting the case to the Industrial Tribunal.  He highlighted the importance of this appeal and the far reaching ramifications of the Court's decision, outside the boundaries of Northern Ireland, and specifically made reference to the implications for the millions of workers on classic zero hour contracts.

So, Judgment has been reserved. At this time we do not have any indication of when the Judgement will be delivered although both sets of Counsel did impress on the Court the importance of the Judgment, which may serve to expedite the process. We do hope that Judgement will be given this side of the forthcoming Summer recess although this is far from certain.  

Where does this leave us?

It looks likely that the Court of Appeal will confirm that as a matter of principle voluntary overtime may need to be counted in the calculation of holiday pay, provided that the voluntary overtime meets the requirements of "normal remuneration." The Patterson case would then be remitted back to the Industrial Tribunal for determination on its particular facts.

If the decision does go this way, this will be the first decision at 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. We do not believe that this likely outcome will come as a surprise to many. That said, it is not the end of the matter as, going forward, the real debate and area of focus as regards voluntary overtime will then fall to be a consideration of the facts of each particular case and whether the manner in which the voluntary overtime is worked meets the components of the normal remuneration test.

There was some debate in Court today about what constitutes "regular" overtime for the purposes of determining normal remuneration? One of his Lordships posed the vexed question of whether 2 weeks of voluntary overtime worked each year for 8 continuous years would be deemed to be regular voluntary overtime?  If not, would 8 weeks of voluntary overtime worked each year for 8 continuous years count? It is clear from these types of theoretical questions that this journey is far from over and that further guidance from case law will be needed to assist with determining the intended meaning of each component of normal remuneration. 

For now, employers in Northern Ireland would be prudent to assume that truly voluntary overtime is likely to be brought into the reckoning of holiday pay and to either readjust their policies accordingly, or to budget for this should their employees bring a claim. It is also of note that, to date, we do not know if any legislation will be introduced in Northern Ireland limiting back-dated holiday pay (and other unpaid wages) to 2 years as will be the case in Great Britain from 1 July, 2015.

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 GB it will undoubtedly be a highly persuasive authority.

For further information please contact a member of our Employment team.

Date published: 17 June 2015