Employees can now seek compensation for past underpayments of holiday pay even if there are intervals of over three months between the underpayments (i.e. deductions).
This was the decision of the Supreme Court in the case of Chief Constable of Police Service of Northern Ireland v Agnew.
The claimants, comprising of over 3,000 police officers and civilian staff in Northern Ireland, argued for compensation due to only receiving ‘basic pay’ instead of ‘normal pay’, which encompasses basic pay, overtime, and various allowances. Although both sides agreed there was an underpayment including compulsory overtime the Supreme Court was tasked with determining how far back the claimants could make their claim.
The relevant Northern Irish legislation, reflecting the Employment Rights Act 1996, specifies that claims can only address payments from the three months preceding the claim’s submission. However, if the deductions form a series, they can be combined if the claim is filed within three months of the final deduction in the series.
In Bear Scotland v Fulton, the EAT had earlier determined that deductions could be connected in a series only if the interval between each deduction was three months or shorter. This clearly limited the period for which Claimants could retrospectively claim holiday pay.
In the latest Supreme Court decision, the Court determined that whilst claims for holiday pay still need to made within three months of the last deduction a claim can be made for a series of deduction even where the intervals between the deductions are more than three months.
The Court highlighted that using a fixed 12 week period to compute holiday pay was not correct and instead, the period should be specific to each individual, reflecting their specific work routine. The Court recommended a more practical approach where “normal pay” calculations are based on averages from the preceding 12 months before leave.
It is important to note that the repercussions of this ruling are lessened for employers since claims for unauthorised wage deductions under the Employment Rights Act 1996 are restricted to deductions over the previous two years only.