Holiday Pay Update: Breaking the chain in a series of deductions

22nd July 2019

The debate on holiday pay continues.

The Court of Appeal in Northern Ireland, in the case of Chief Constable of the Police Service of Northern Ireland v Agnew, recently ruled that long running holiday pay claims, some stretching back 20 years, were valid.

In reaching this decision, the court’s findings differed from the position of the Employment Appeal Tribunal (EAT) in the high profile holiday pay case of Bear Scotland v Fulton. Most notably, the court held that a gap of three months between deductions from holiday pay will not break a ‘series of deductions’ for the purpose of a claim, and it is potentially open for claimants to assert their historical rights by looking back beyond a previous gap exceeding three months. This is contrary to Bear Scotland where a gap of more than three months in a ‘series’ of deductions was held to be sufficient to break that series, preventing a claimant from looking back beyond this point.

Applying this test effectively knocked out most claims for long periods of back-pay, since most employees will have gaps of more than three months when they do not take holiday. It also meant that a series of unlawful deductions could be interrupted by one payment of the correct amount of holiday pay.

Over 3,300 police officers and 364 civilian employees brought claims for underpayment of holiday pay against the Police Service of Northern Ireland and the Northern Ireland Policing Board stretching back, in some cases, to 23 November 1998 (when the Working Time Regulations (Northern Ireland) came into effect).

During this period they were paid holiday pay at a basic rate, excluding overtime and various allowances. The claimants argued, following the rulings in 2014, that their holiday pay should be their normal pay and take into account overtime.

The Northern Ireland Tribunal and Court upheld the complaints.

On the question of how far back employees should be allowed to claim, the court emphatically chose not to follow the decision of the EAT in Bear Scotland (i.e. that any series of deductions is automatically broken by a gap of three months). In doing so, it asserted that the current method of calculation flowing from Bear Scotland could lead to ‘arbitrary and unfair results’. It stated that identification of a factual link in an alleged series of deductions is what determines whether a correct payment of holiday breaks the series of deductions.

What is the impact on schools?

This decision has significant cost implications for employers operating in Northern Ireland.

Employment tribunals and courts in the rest of the UK are not obliged to follow the decision. However, it may provide strong persuasive authority on any future appeal which seeks to challenge the decision of the EAT in the Bear Scotland case (not least because the wording of the relevant legislation in Northern Ireland is the same as in the Employment Rights Act).

That said, schools may continue to draw some comfort from the Deduction from Wages (Limitation) Regulations 2014 which imposed a cap of two years on retrospective unlawful deduction from wages claims (which includes claims for holiday pay). Any claim for backdated holiday pay is therefore likely to be capped at two years.

It is also possible that the case may be appealed and if so, the appeal would be to the Supreme Court, having jurisdiction over the whole of the UK.

For more information, please contact Hannah Wilding on 01242 246485 or at [email protected].