Can employees claim for historic underpayments of holiday pay even if there are gaps of more than three months between deductions?
The Supreme Court has decided in the recent case of Chief Constable of Police Service of Northern Ireland v Agnew that employees can claim for historic underpayments of holiday even if there is a gap of more than 3 months between holiday pay deductions.
In this long running case, the claimants were police officers and civilian staff working for the police in Northern Ireland. Over 3,300 police officers and 364 civilian employees brought claims against their employer arguing that they had been underpaid when taking their holiday and were entitled to more holiday pay. When taking holiday they had historically been paid their basic pay only.
Due to the nature of police work periods of compulsory overtime are commonplace in the profession. For example, where extra assistance is needed to police large events. They claimed they had been underpayment when taking their holiday because their holiday pay was not calculated to include payments of compulsory overtime.
Their claim was successful, and it was found that they had been underpaid for periods taken as holiday. The question then was how far back they could claim for these underpayments. It was the case of the police service that only the last 3 months could be compensated however the claimants disagreed and wanted to go back further to November 1998 for more substantial compensation for the underpaid holiday.
The relevant law before the case
In employment law one of the most common limitation time frames is 3 months and it features in many aspects of the Employment Rights Act 1996. In Northern Ireland the relevant legislation to this dispute closely mirrors the law in the rest of the UK. There, the law made clear that a claim could only be made in respect of an under payment made in the three months before the claim was brought, unless the deduction was part of a series, in which case the deductions could be linked together provided that the claim was brought within three months of the last of the series of deductions.
Previous case law, such as in Bear Scotland v Fulton, dictates that in practice deductions can only be deemed to link in a series if a gap of 3 months or less is between each deduction. These findings would have been beneficial to the Police if followed as they could have significantly reduced the under payments they were obliged to pay.
The Supreme Court’s decision
The court found in this case that if a series of deductions are all based on an employer failing to properly account for holiday pay and, but for the Bear Scotland rules, they would otherwise follow a series, then each deduction should be linked. The judges directed that the period in which a claim can be brought is 3 months from the date of the last payment. Yet this 3-month limit does not restrict or qualify the meaning of a so-called series of deductions.
To determine if a claim concerning 2 or more deductions is a claim in respect for a series of deductions all the relevant facts and circumstances of the case need to be considered. For example: the similarities and differences between deductions, their size and impact, the links between them, the circumstances as to how they were made and applied and their frequency. From here the court decided it is not relevant if the deductions were greater than 3 months apart or not.
The cost to the police force paying compensation to their employees after this case is estimated to be in the region of £30-40 million!
The other nations of the UK are impacted too by this decision and employers here should take note. Importantly, in England, Scotland and Wales legislation enacted in 2014 has the effect of imposing a 2-year limit on unlawful deductions in employment brought after 1st July 2015. Therefore, at the moment the potential liability for employers in these countries is greatly reduced. However, this backstop is almost certainly going to be subject to challenge in light of this case.
How Moore Barlow can help
We recommend that employers review their current holiday pay calculations in light of this decision. Our Employment law team are available to provide you with advice on this topic so please do not hesitate to contact us if you would like our support.