Supreme Court decision on holiday pay and unlawful deductions
The Supreme Court has held in Chief Constable of the Police Service of Northern Ireland v Agnew that a gap of more than 3 months in a series of deductions from wages does not break that series for the purposes of bringing an unlawful deductions claim.
This follows the Court of Appeal in Northern Ireland's (NICA's) decision back in 2019 and is bad news for employers as it widens the potential scope of historical holiday pay claims.
The claimants, over 3,300 police officers and 364 civilian employees, brought claims for unlawful deductions under the Employment Rights (Northern Ireland) Order 1996 (ERO) and claims for underpayment of holiday under the Working Time (Northern Ireland) Regulations 1998 (WTR (NI) 1998). The respondents admitted that, since the implementation of the WTR (NI) 1998 on 23 November 1998 they had calculated holiday pay by reference to basic salary, instead of by reference to normal pay including overtime.
One of the things the NICA looked at was whether a series of unlawful deductions would be interrupted by gaps of more than three months. It held that it would not be, and that a series could be constituted by deductions with a sufficient frequency of repetition, but occurring at different time intervals and in different amounts. It held that whether there had been a series of deductions was a question of fact.
The NICA decision in Agnew was not legally binding on tribunals in Great Britain, so the decision of the Supreme Court on appeal, which is now binding throughout the UK, was awaited with interest.
The Supreme Court has agreed with the NICA, making the point that the purpose of the provisions regarding unlawful deductions is to protect workers, some of whom may be vulnerable, from being paid too little for the work they do. It has held that what constitutes a series is a question of fact that must be answered in light of all relevant circumstances. It determined that, in Agnew, the NICA was right to find that each unlawful underpayment was linked by the common fault that holiday pay had been calculated by reference to basic pay only. It follows that a gap of more than three months between deductions will not necessarily bring a series to an end.
Take note: This decision adds a new dimension to the already tricky area of holiday pay. Workers bringing claims for underpaid holiday will no longer have to worry about a gap of three months or more in a series of deductions operating to defeat their claims. As what constitutes a series of deductions will be a question of fact in each case there will be a considerable element of uncertainty for employers. However, it will be some consolation that there is still a two-year limit on claims for backdated holiday pay, so any unforeseen liabilities will be capped.