Holiday pay – The latest case ‘Patterson v Castlereagh Borough Council’ Does it affect your business?

The latest case is another in a string of cases surrounding holiday pay which companies must take note of.

Below is a basic summary of the latest position to assist companies in understanding the position without too much legal technicality (I hope).

The Law

Holiday Pay falls under the Working Time Directive 1998 (“WTD”). The WTD provides that the UK must allow all workers to have at least four weeks paid annual leave (5.6 weeks).

Workers are entitled to be paid at the rate of a ‘weeks pay’ for each week of leave.

What the WTD does not do is tell companies how to calculate statutory holiday pay and only provides a definition of ‘normal remuneration’.

Recent Case Law

In 2011, the case of Williams and others v British Airways expanded on the concept of ‘normal remuneration’ and concluded that when a worker is on holiday they should be paid holiday pay which reflects the normal basic salary but also renemueration which is ‘intrinsically linked to the performance of the tasks which the worker is required to carry out under the contract of employment’.

The Patterson Case

Although this case was determined in Northern Ireland, the Northern Ireland Working Time Regulations (“NI WTR”) is substantively the same as the UK Working Time Regulations.

Mr Patterson was an employed as an Assistant Plant Engineer of Castlereagh Borough Council (“Council”) (at the Dundonald International Ice Bowl). Mr Patterson regularly worked voluntary (non-compulsory) overtime and was paid at the rate of time and a half.

When Mr Patterson received his holiday pay he was only paid at a rate of basic hours only and the voluntary overtime was not included.
Mr Patterson brought a claim for an unlawful deduction from wages and that the Council was in breach of the NI WTR.

Conclusion

The tribunal rejected his claim and on face value seemed to take the approach of the case of Bear Scotland and concluded that the Working Time Directive did not require voluntary overtime to be included in the calculation of statutory holiday pay.

However, Mr Patterson appealed to the Northern Ireland Court of Appeal and argued the tribunal had misdirected itself.

The Northern Ireland Court of Appeal agreed with Mr Patterson and sent the case back to the tribunal to consider further evidence of the overtime actually worked by Mr Patterson.

It will now be a question of fact for each tribunal to determine whether or not voluntary overtime is normally carried out by a worker and the money received for the overtime is a permanent feature in the remuneration paid to the worker.

That said, decisions in the Northern Ireland Court of Appeal are not binding in England and Wales. They certainly are persuasive in their authority but I do not believe this case will have much impact in the English tribunals.

One of the main questions which arises out of this case is whether voluntary overtime can satisfy the test for normal remuneration established in Williams namely, there must be an intrinsic link between the performance of the tasks which a worker is required to carry out under their contract and the remuneration received. This question is still left unanswered by Patterson case and therefore does not clarify the position since the Williams decision in 2011, therefore commercially companies may see it is more prudent to simply carry on with the current status quo.

For further information or if you have any issues you would like to discuss, speak to Laura at Cinch Legal on: 01925 594495 or email: LauraP@thecinchgroup.com