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It does not feel like we are more than 6 months on from the widely publicised holiday pay decision of Bear Scotland and others, but we are. As a brief refresher, the Bear Scotland cases involved three appeals in which the EAT held that employees’ holiday pay should reflect “normal remuneration” and that required inclusion of non-guaranteed overtime.
The Bear Scotland cases were restricted to the issue of non-guaranteed but compulsory overtime (i.e. overtime which the employees were obliged to carry out if asked). The EAT did not require to answer questions about voluntary overtime and some commentators suggested that the decision did not apply to voluntary overtime.
There was a case at Employment Tribunal level (Neal v Freightliner Ltd) which decided that payments for voluntary overtime did need to be included in holiday pay. That case was due to be heard by the EAT at the same time as Bear Scotland, however the matter settled prior to the EAT hearing. Accordingly, the issue of voluntary overtime remained untested at EAT level.
More recently, the Northern Ireland Court of Appeal has been faced with the question of whether voluntary overtime requires to feature in holiday pay. In Patterson v Castlereagh Borough Council, the Court found that the employment tribunal had been wrong to rely on Bear Scotland as justification for excluding voluntary overtime from holiday pay. The Court found that holiday pay is to be based upon normal remuneration. The concept of normal remuneration is a matter of fact for the tribunal to determine on a case by case basis. Accordingly, Mr Patterson’s case was remitted to the employment tribunal to determine whether the voluntary overtime did fall within normal remuneration.
Regrettably, the Court declined to offer any guidance on the tests which employers should apply in determining holiday pay, reminding us that this is a matter for case by case determination. This decision will not be the last in the ongoing holiday pay saga, although it does widen the scope for the inclusion of voluntary overtime in holiday pay.
Although the decision from the Northern Ireland Court of Appeal is not binding on UK employment tribunals, the decision is likely to carry a degree of persuasive weight and UK employers should take note (and keep ears to the ground for the decision of the remitted tribunal to follow).
Senior Solicitor – Employment Law