The UK Supreme Court (UKSC) case of Chief Constable of the Police Service of Northern Ireland & Anor v Agnew & Ors has recently provided clear authority for workers bringing claims for historical underpayments of holiday pay.
The case appeared in the UKSC earlier in October 2023 on appeal from 2019 and concerned 3380 police officers and 364 civilian members of staff who brought claims against the Police Service of Northern Ireland, for underpayment of holiday pay, going all the way back to 1998 when the Working Time Regulations were first introduced.
The Police officers and members of staff claimed that they had been underpaid holiday pay. They argued that their holiday pay should not be based solely on their basic pay and their ‘normal remuneration’ should be taken into account including allowances and overtime. Claims were therefore brought for unpaid holiday under the Working Time Regulations and for unlawful deductions from wages under the Employment Rights (Northern Ireland) Order 1996 (ERO).
The Police Service estimated that the claims in full would amount to an estimated £30 million. They therefore sought to reduce the extent of how far back in time the claims could go. If the Police Service limited the underpayments to three months prior to the beginning of proceedings, costs would be significantly reduced to around £300,000.
In order to reduce the costs, the Police Service argued that police officers were not entitled to bring a claim as they were not defined as ‘workers’ under the ERO. They further argued that a previous Employment Appeal Tribunal case of Bear Scotland v Fulton (2015) prevented the historical claims from being brought because the gaps between the underpayments were more than three months apart and they could not be linked as a series of deductions.
The UKSC dismissed the appeal and ruled in favour of the workers. It was ruled that it was unnecessary to decide whether the police were defined as ‘workers’ within the meaning of the ERO. The Court confirmed that the police officers were able to bring claims in relation to the underpayments.
Secondly, it was ruled that in relation to a series of unlawful deductions, the series would not come to an end just because the underpayments had a gap of more than three months. It was outlined that the purpose of provisions in relation to unlawful deductions of wages were there to protect vulnerable workers. In relation to holiday pay, limiting the time to three months could result in unfair consequences.
In summary, the Court ruled that a three-month gap between a series of underpayments does not prevent them from being part of a series. Therefore, employees can still bring a claim for historical underpaid holiday pay. It is important to note that a claim must still be brought within three months of the last deduction.
So what does this mean for employers?
The amount of employees involved in this recent case and the costs amounting to around £30 million, is a significant consequence for the employer and serves as a warning to other employers.
It is estimated that this case will also create consequences for other employers in Northern Ireland as it is thought there might be thousands of employees awaiting outcomes for holiday pay cases that have been stayed pending the outcome of this judgement.
Going forward it is important for employers to take notice of this ruling as this case means that workers can now claim back further than before. Employers should ensure that they are mitigating any risk of holiday payback claims. It is vital to ensure that holiday pay is being correctly calculated factoring in the pay that workers would normally receive, including regular overtime and/or commission.
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