HOLIDAY PAY – AGAIN!
Due our previous update on the evolution of the law regarding overtime and holiday pay, you will no doubt be familiar with the ongoing holiday pay saga. The most recent update came from Northern Ireland where the Court of Appeal (NICA), which is the equivalent of our Employment Appeal Tribunal here, heard the case of Patterson v Castlereagh Borough Council.
To cut a long story short the Court of Appeal held that there is no reason in principle why voluntary overtime should not be included in statutory holiday pay, but unfortunately it said little to clarify precisely when and in what circumstances.
The decision was by no means definitive and merely established that it is possible for voluntary overtime payments to be included as part of an employee’s ‘normal remuneration’ for the purposes of the Working Time Regulations (Northern Ireland) 1998 (which are substantively the same as the Working Time Regulations 1998). Therefore, if an employer is under no obligation to offer and an employee is under no obligation to accept overtime but on occasions an employee works overtime on an entirely voluntary basis, this can be taken into account when calculating the employee’s holiday pay.
The decision is only binding in Northern Ireland and not the rest of the UK. However, NICA decisions are considered persuasive by British courts and tribunals where there are no existing binding cases on a point. Therefore, the NICA's decision could well influence the outcome of future cases in England and Wales.
Following this decision, it seems likely that the focus in relation to voluntary overtime will fall to be a consideration of the facts of each particular case and whether the manner and regularity in which the voluntary overtime is worked meets the requirements of the "normal remuneration" test.
Whilst February saw the Employment Tribunal in Lock v British Gas rule that commission should be included as part of holiday pay calculations where it is directly linked to the work carried out by the employee, this decision was appealed to the EAT. The EAT heard the appeal in December 2015 and we now await the ruling on whether commission must be included in holiday pay for private sector workers.
In Fulton v Bear Scotland the EAT is also being asked to reconsider how far back workers can go in claiming holiday pay and, specifically whether a gap of more than three months in underpayment means the right to claim is lost.
With both Lock and Bear Scotland possibly needing to go to the Court of Appeal before there is any real clarity on the issues, sadly, holiday pay is an issue which looks unlikely to be resolved with any speed.
Despite this continued lack of clarity, it is important that employers take the time now to analyse current arrangements for guaranteed, non-guaranteed and voluntary overtime to assess potential liabilities. If you need advice on whether changes should be made now in order to prevent potential back pay claims or wait for UK law to be further clarified, please contact a member of our Employment Department.