In this case law update we look at the ramifications on holiday pay given a decision by the Supreme Court.
The Supreme Court recently heard the case of Chief Constable of the Police Service of Northern Ireland v Agnew where it was found that employees could claim for historic underpayments even where there were gaps of more than three months between the deductions. A gap of three months would otherwise cause a break in a series of deductions wages claim as we explain further below.
In this case, the Claimants were working for the police in Northern Ireland. They brought claims for an underpayment of holiday pay as historically they had only ever received basic pay during their annual leave. It was found that the Claimant’s holiday pay should have been calculated to also include periods of compulsory overtime and as such there had been an underpayment.
The Supreme Court therefore had to decide how far back the Claimants could claim in terms of their underpaid annual leave. The statutory position was that a claim could only be made in respect of an underpayment made in the three months before the claim was brought, unless the deduction was part of a series. If the deduction was part of a series of deductions, these could be linked together on the basis that the claim was brought within three months of the last deduction. Therefore, employers could argue that where there had been a gap of more than three months, the series had been broken.
Previous case law further added that deductions could only be linked in a series if the gap between the deductions was three months or less. However, the Supreme Court in Agnew found that where a series of deductions are all based on an employer failing to meet its obligations to pay holiday pay correctly and, but for the mandatory 3 months, they would otherwise constitute a series of underpayments, then the employee should be able to link the deductions.
The period in which a claim can be brought remains at three months from the date of the last underpayment, but this three-month limit does not define the meaning of the series of deductions.
The Supreme Court went on to explain what is considered when deciding whether there is a series, stating:
“whether a claim in respect of two or more deductions constitutes a claim in respect of a series of deductions is essentially a question of fact, and in answering that question all relevant circumstances must be taken into account, including, in relation to the deductions in issue: their similarities and differences; their frequency, size and impact; how they came to be made and applied; what links them together, and all other relevant circumstances”.
Whilst this opens up the potential for Claimant’s with historical underpayments to claim a significant amount of this back in the Employment Tribunal, this is mitigated by the Employment Rights Act (new sections 23 (4A) and (4B) which gives a maximum claim period of two years. These provide that, for unlawful deductions claims brought on or after 1 July 2015, an employment tribunal cannot go back more than two years before the date of the claim.
Nevertheless, this decision potentially opens the floodgates to more historical underpayments being awarded by the Tribunal and a greater amount claimed in that two year period.
For advice on how this may impact your business and what you may need to do going forward, please get in touch with one of our specialist team today.
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