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October 5, 2023
The Supreme Court has decided the long-awaited holiday pay case of the Chief Constable of the Police Service of Northern Ireland & PSNI another v Agnew & others. The ruling is important because it clarifies how employers should properly calculate holiday pay. Read on to find out what employers should do now.
The Claimants in this case were a mix of NI police and also civilian staff. Civilians could bring their claims for repayment of holiday pay shortfalls under the ‘unlawful deductions’ laws in Northern Ireland. This meant they could claim in respect of a series of deductions potentially going back as far as 1998 (the date Working Time Regulations came into effect).
In Great Britain however the exposure for employers is currently limited to 2 years holiday shortfall back pay for any holiday pay underpayment claims started after 1 July 2015.
The first big issue in this case was whether the police officers, not being typical workers, could also rely on the above rules to bring their claims. The Supreme Court said that the police officers were entitled to claim in respect of a series of deductions and so may also claim in respect of the underpayment of their holiday pay as far as 1998. The important point of this aspect was that, their claims for underpaid holiday pay are not limited to deductions only for the period of three-months leading up to the presentation of their claims to the Employment Tribunal.
The next big decision was that the Court disapproved of an earlier well-known decision of the Employment Appeals Tribunal called Bear Scotland Ltd v Fulton . In “Bear” it was decided that 3 months of correct pay would break the chain of how far back a worker could go when calculating their holiday pay shortfalls. Essentially a worker could not go back further than the three months of correct pay. The Supreme Court in this latest case said that a relevant “series” for the purposes of a claim of unlawful deductions is not necessarily broken by a gap of three-months between incorrect underpayments (or deductions) of holiday pay. This opens the possibility for workers to bring claims for shortfalls in holiday pay going back beyond any 3 month period of correct payments.
The Court also said that the Police Service of Northern Ireland had made a series of unlawful deductions of holiday pay from wages with each deduction being factually linked. The Court said there was a “common fault” linking the pay deductions.
In summary: a break of 3 months between incorrect holiday payments does not automatically “break the chain” of underpayments of holiday pay.
The decision of the Supreme Court is likely to mean more holiday pay claims for employers so it’s very important for employers to ensure they have audited for underlying liabilities and pay holiday pay correctly. This means paying “normal pay” which might include, for example – overtime payments, as opposed to paying just “basic pay” for holidays. There a lots of factors to take into account in order to get the calculation of holiday pay right.
Holiday pay is a notoriously complex area and one many employers understandably struggle with. It is a particularly difficult issue for gig economy workers and hirers to navigate.
The Supreme Court also gave guidance as follows:
The Police Service in Northern Ireland may now be looking at a larger bill than anticipated for backdated shortfalls in holiday pay.
So, what should employers do now? Employers should ensure they have audited their holiday pay calculations and also ensure that whatever shortfalls may have happened in the past, that holiday pay is correctly calculated for workers going forwards.
If you would like further information and guidance on how to deal with holiday pay in your organisation please get in touch with us or email joan.pettingill@gunnercooke.com
Please note that this is a summary and specific advice should be taken in any given case.
