What does the Supreme Court case of Chief Constable of the Police Service of Northern Ireland v Agnew mean for holiday pay claims?
When employers pay employees incorrectly for their holiday pay employees generally have to bring a claim within three months of the deduction being made.
This changes when there has been a ‘series’ of deductions. If this is the case the tribunal will be able to deal with all the deductions in the ‘series’ provided the claim is brought within three months of the last of the deductions.
The 2015 case of Bear Scotland Limited v Fulton provided more detail on this. There, the EAT concluded that in order to form part of a ‘series’ the deductions had to be linked. Crucially, it held that a period of more than three months between the deductions would break the ‘series’ or the chain.
This means that an employee (whose holiday pay has been calculated incorrectly) who took time off in January and March then did not take holidays in April, May and June, then took more time off in August and October would only be able to claim for the period August to October. This principle was often adopted to reduce employers’ exposure to holiday pay claims.
This has now been overturned by the case of Chief Constable of the Police Service of Northern Ireland v Agnew. The Supreme Court has held that a gap of three months or more will not automatically break the ‘series’ of deductions. It also held that if a correct payment is made in the middle of a chain of incorrect deductions this will also not automatically break the ‘series’. This means that in the example above the employee may well be able to claim from January.
So how will a ‘series’ be defined now? The Supreme Court has explained that this will turn on the specific facts of each case. The tribunal will need to look at factors such as: the frequency of the deductions, how big or small the deductions are, and if the deductions are similar or linked. It emphasised that it is important to analyse the common ‘fault’ behind the deductions. The Supreme Court decided that in this case the ‘fault’ was the fact that holiday pay was calculated using basic pay as opposed to normal pay.
What does this mean for employers? Essentially, employees can potentially claim for holiday pay further back than they were able to before this ruling. However, it is important to note here that there is a two-year backstop for claims of this nature, meaning that the ‘series’ of deductions will not be able to extend beyond two years. The Supreme Court has emphasised that each case will turn on its facts, which means less certainty for employers and a likely increase in litigation on this point.
If you have any questions on any of the issues raised in the above article, please contact Natalia Milne.