Voluntary overtime

According to recent case law, non-guaranteed overtime should be included in the calculation of statutory paid holiday leave if it forms part of the worker’s normal remuneration. In Patterson v Castlereagh Borough Council, the Northern Ireland Court of Appeal held that there was no reason, in principle, why voluntary overtime should not also be included in statutory holiday pay.

Basic facts

Mr Patterson, an assistant plant engineer for Castlereagh Borough Council, regularly worked voluntary overtime for which he was paid a higher rate. As overtime was voluntary, the Council was not obliged to offer it to Mr Patterson, nor was he required to do it when it was offered to him.

However, as his employer did not include the higher overtime rate when calculating his entitlement to statutory holiday pay, Mr Patterson brought a claim for unlawful deductions from wages. The Council argued that it was not required to include the payments because the overtime was voluntary.

Tribunal decision

Following the decision in Bear Scotland (weekly LELR 397) which held that non-guaranteed overtime pay must be included if it forms part of normal remuneration, the tribunal decided that Mr Patterson’s overtime could not form part of his normal remuneration as it was voluntary (as opposed to non-guaranteed).

As a matter of principle, therefore, it could not be included in the calculation of holiday pay for the purposes of the Working Time Regulations. Mr Patterson appealed.

Decision of Court of Appeal

The Council agreed that if the tribunal had found in principle that the Working Time Directive (which the Working Time Regulations implement) did not require holiday pay to include voluntary overtime then it was wrong. However, the Council argued that the tribunal had not made a finding about the principle but rather that Mr Patterson had failed to establish that voluntary overtime was part of normal remuneration.

The Northern Ireland Court of Appeal held that the tribunal had rejected Mr Patterson’s claim on a point of principle. As the Council had conceded this point the Court did not hear full legal argument on the issues and only reviewed the key principles established by the case law.

In British Airways plc v Williams, the Court of Justice of the European Union (CJEU) held that workers must receive their normal remuneration and that as the point of paid leave is to put the worker when on holiday “in a position which is, as regards remuneration, comparable to periods of work”, then they must be paid for work they are required to carry out. In Lock v British Gas (weekly LELR 419), the CJEU held that commission calculated on the basis of sales also had to be included in the calculation of holiday pay. Finally, the EAT held in Bear Scotland that the directive required overtime which workers had to work but which employers were not obliged to offer should be included in the calculation of statutory paid holiday.

As the rationale of the directive was not to deter workers from taking holiday and to ensure that if they had come to expect a certain level of pay as normal then that is what they should receive during their holiday period, the Court of Appeal held that there was no reason, in principle, why voluntary overtime should not be included in statutory holiday pay. However, it was a question of fact for tribunals to decide whether or not it was being carried out with sufficient regularity to be included.

It therefore remitted the case back to the tribunal to consider the matter further in accordance with the principles of law set out in the Court’s judgment.