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Patterson v Castlereagh Borough Council: View from Littleton

Charlene Hawkins writes for our monthly column “View from Littleton Chambers” in Tolley’s Employment Law Newsletter. This article first appeared in the July 2015 edition.

The long-running saga of how to calculate holiday pay continues with a decision from the Northern Ireland Court of Appeal, which, although not binding on English courts, perhaps indicates the direction of the current tide on this important topic. 

We know from Bear Scotland Ltd and Others [2015] 1 CMLR 40, that normal non-guaranteed overtime (ie, overtime that employees are contractually obliged to work) should be included in the calculation of holiday pay. In Patterson v Castlereagh Borough Council  [2015] NICA 47, the Northern Ireland Court of Appeal took this one step further. Patterson originally alleged that there had been an unlawful deduction from his wages by virtue of the fact he was no longer paid holiday pay with regard to casual work as a recreation assistant, which he carried out over and above his full-time post as an assistant plant engineer. In the course of the hearing, the application was amended to allege in addition that there was a further unlawful deduction in that his holiday pay did not take into account the voluntary overtime he worked as an assistant plant engineer (ie, overtime that was neither guaranteed nor contractually required). The tribunal found in favour of the former allegation but dismissed the latter. Patterson appealed the latter finding. 

The Northern Ireland Court of Appeal, after briefly reciting the key recent authorities on holiday pay, cautiously decided that, in principle, there is no reason why voluntary overtime should not be included when calculating an employee’s holiday pay, but said that each case will turn on its own facts. In particular, it stated that:

“[20] The rationale behind the 2003 directive is, as declared in para [44] of the Bear Scotland decision and consistent with the principles explained by the CJEU, that a worker should not have any disincentive placed in his path that may lead to him not taking his holidays — if he comes to expect a certain level of pay as normal then he should receive that during his holiday period. Whilst from a purely practical viewpoint this may smack more of theory than reality in most instances, it is the rationale that purportedly underpins the directive and drives the case law thereon.

“[21] We are satisfied therefore in light of these authorities…that in principle there is no reason why voluntary overtime should not be included as a part of a determination of entitlement to paid annual leave. It will be a question of fact for each tribunal to determine whether or not that voluntary overtime was normally carried out by the worker and carried with it the appropriately permanent feature of the remuneration to trigger its inclusion in the calculation.”

The decision suggests that cases may turn on whether the employee has “come to expect” overtime as being normal. We do not yet know how that test will be applied, but can anticipate that it will be an objective test (albeit with a subjective element), based primarily upon the regularity of overtime.Given the recent developments, employers are well advised to include overtime in holiday pay calculations in respect of, at least, the basic four weeks’ leave granted under the Working Time Directive, especially where overtime is guaranteed, required and/or regularly worked (even if only to break a potential long-standing series of deductions).However, it should be noted that whether or not this position applies retrospectively or only prospectively is still up in the air pending the appeal to the Employment Appeal Tribunal in Lock v British Gas, which challenges the validity of the purposive interpretation given to the Working Time Regulations in Bear Scotland. 

So, watch this space!
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