Facts of Chief Constable of Police Service of Northern Ireland v Agnew
In this case, over 3,600 police officers and civilian employees brought claims for underpayment of their holiday pay going back to 1998. The underpayments had arisen because the holiday pay was calculated using basic pay only and not overtime. The Supreme Court was asked to decide how many years back the Claimants could claim.
A claim for unlawful deduction from wages must be brought within three months of the alleged deduction. Where there has been a series of deductions, the time limit begins to run from the date of the last deduction in the series.
Where a claim for underpaid holiday is brought as a claim for unlawful deduction of wages, it must therefore be made within three months of the date of the underpayment. Prior to the Supreme Court ruling in this case, the Employment Appeal Tribunal held that if underpayments of holiday pay were more than three months apart, they could not be considered linked as a series of deductions. For instance, if a worker was underpaid for holiday taken in January and then underpaid for holiday taken in May and subsequently bought a claim, they could not claim for the underpaid January holiday because it was “out of time”.
Supreme Court Decision
The Supreme Court has ruled that when deciding whether there has been a series of deductions which are linked, a three month pay gap does not automatically break the chain or series of deductions, nor does an instance of making a correct holiday payment. Now, when deciding whether there has been a series of deductions, all relevant circumstances must be taken into account, including: deductions’ similarities (each deduction must be “factually linked to its predecessor and successor by a common fault or unifying or central vice”), their differences, their frequency, size and impact, how they came to be made and applied, and what links the deductions together.
With the Police case, the common fault linking each unlawful deduction was that holiday pay was calculated by reference to basic pay rather than normal pay (which included overtime). Once that common link was established, the Supreme Court concluded that: “It mattered not that the interval between these payments was from time to time in excess of three months; and these intervals of more than three months did not, in and of themselves and as a matter of law, break the series or bring it to an end.”
How far back can a worker now claim?
In Great Britain, the Deduction from Wages (Limitation) Regulations 2014 places a limit of two years on any unlawful deduction claims brought after 1 July 2015. Accordingly, this would represent a cap. Underpaid holiday claims are therefore currently capped at two years. However, these regulations may be subject to future challenge. The two year cap does not apply in Northern Ireland.
Next Steps for Employers
Employers are encouraged to carry out an audit of their existing holiday pay calculations to assess risk in terms of potential claims for underpayments, including (but not solely) in relation to whether or not overtime is being approached correctly. While a single lawful payment will not now automatically break a series of deductions, it will start the clock on the 3 month limitation period, which may increase the chances of that three month period passing without a claim being made.
How can Price Bailey help?
Price Bailey offers payroll and employment law support. We can calculate holiday pay for you or answer any questions you may have in relation to holiday pay. Please do not hesitate to get in contact with us using the form below.
We always recommend that you seek advice from a suitably qualified adviser before taking any action. The information in this article only serves as a guide and no responsibility for loss occasioned by any person acting or refraining from action as a result of this material can be accepted by the authors or the firm.
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