Holiday pay claims Chief Constable for Northern Ireland Police v Agnew

In a decision that is estimated to cost the police force £40 million, the Court of Appeal in Northern Ireland has ruled that long running holiday pay claims, some stretching back 20 years, were valid. A gap of more than three months between holidays did not amount to a break in a series of deductions, for the purposes of claiming holiday pay, and therefore a series of unlawful deductions could be established.

The position in relation to the amount of back-pay that can be claimed for underpaid holiday pay in England, Wales and Scotland is different. There, claims raised after 1 July 2015 have been limited to two years back-pay since The Deduction from Wages (Limitation) Regulations 2014 (the “2014 Regulations”) were brought into force to reduce large employer pay-outs. Nevertheless, this decision could have implications for employers across the UK.

Background

In 2014, the EAT in Bear Scotland v Fulton took a novel approach to holiday pay claims stretching back over successive leave years, ruling that a gap of more than three months between holidays would break a series of deductions for unlawful deductions from wages claim purposes. Applying this test effectively knocked out most claims for long periods of back-pay, since most people will have gaps of more than three months when they don’t take a holiday. It also meant that a series of unlawful deductions could be interrupted by one payment of the correct amount of holiday pay. Although the 2014 Regulations were introduced in Great Britain, Northern Ireland did not decide to introduce similar legislation.

Facts

Over 3000 police officers and civilian employees brought claims for underpayment of holiday pay 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 of Appeal upheld the complaints. In a decision that covered a variety of points, the Court concluded that gaps between holidays within a leave year did not break a series of deductions. It said:

“In order to establish a series of deductions a claimant does not have to establish that every payment made to him during a particular period of time was subject to an unlawful deduction. In our view it is necessary to identify the alleged series. In these appeals the alleged series is a series of unlawful deductions in relation to holiday pay. There will have been appropriate payments of pay between the various holiday payments whilst the claimants were at work which will not have been subject to unlawful deductions. However identifying the series as a series in relation to holiday pay means that those lawful payments whilst the claimant was at work will not interrupt the series.”

The Court also dealt with a number of other points including the issue of whether employers can designate the first four weeks of holiday as “European statutory leave” (the minimum leave to which employees are entitled under the Working Time Directive), and separate this from the additional 1.6 weeks UK leave provided for by the UK Working Time Regulations. It decided leave should not be separated out in this way (as had been suggested in Bear Scotland). The Court was also asked by the parties to give guidance on the correct reference period for other cases, but was unwilling to do so, and explained that the correct reference period will depend on the facts of the case.

Comment

This decision has significant cost implications for employers operating in Northern Ireland, where it has been reported in the press that the unions have been closely following the case. Its impact will be felt across both the public and the private sector.

If an employer is operating across Northern Ireland and the rest of the UK, unions are more likely to argue for a holiday pay deal which covers the whole of the workforce.

For employers operating in England, Scotland and Wales, there is less of an impact; as this was a Northern Irish case, it is not binding on the EAT in Great Britain. Nevertheless, it is likely to be put to the EAT as a persuasive argument in the future, given the similar wording of the legislation.

It should also be noted that the two year backstop does not apply where the claim is for non-payment of holiday pay because the individual was denied the opportunity to take holiday, following the decision in Sash Windows v King.