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Supreme Court rules on historic holiday pay claims

October 24, 2023
Employment Law

In this article, we report on the important Supreme Court decision in the case of Chief Constable of Police Service of Northern Ireland v Agnew. This judgment provides some much-needed clarity on the extent to which employees can claim for the historic underpayment of holiday pay.

The facts

This case was bought by a group of police officers and other civilian employees who worked for the Police Service of Northern Ireland (PSNI). They claimed that since the Northern Irish version of the Working Time Regulations came into force, their holiday pay has been wrongly calculated by reference to their basic pay only, without properly accounting for the overtime pay and other allowances to which they were normally entitled.

The PSNI employees began to bring their claims for alleged underpayment of holiday pay after a number of well-publicised decisions suggested that holiday pay ought to take account of all forms of ‘normal remuneration’, not just basic pay.

For the purposes of this Supreme Court decision, all parties accepted that holiday pay ought to have been calculated to include overtime and other allowances. However, there was disagreement over how far back the claim for holiday pay could stretch. The basic position under UK law is that a claimant needs to bring a claim of this sort within three months of the underpayment occurring. Where there has been a series of connected underpayments, the law will normally permit the claimant to make a claim in relation to all of those underpayments, as long as the last of them occurred within three months of the claim. However, a previous case (Bear Scotland v Fulton) concluded that if there was a gap of more than three months between any of these underpayments, this would sever the chain and prevent the claimant from going back any further. The Supreme Court was asked to decide whether the Bear Scotland decision is correct.

The decision

The Supreme Court heard this case in December 2022. However, it only published its final judgment in the last couple of weeks. The five Supreme Court justices have unanimously concluded that whilst it is the case that for a holiday pay claim to be valid, it must be brought within three months of the last of the underpayments complained of, a gap of more than three months between any of those underpayments will not sever the chain. Instead, the historic holiday pay claim can go back further in time, despite the gaps.

Good news for workers?  Bad news for employers?

Importantly, this case reasserts the worker’s right to claim (potentially) significant compensation for the historical underpayment of holiday pay. Admittedly, the government introduced new regulations a few years ago which purport to restrict claims of this nature to a maximum of two years’ underpayment. However, some have questioned the validity of these new regulations. So the question for future cases is whether those regulations genuinely prevent workers from going further back in time or not. We await, with interest, to hear about the next instalment of this particular holiday pay saga.

Worried about your holiday pay arrangements?

There are still a large number of employers out there who have yet to ‘grasp the nettle’ and properly consider the lawfulness of their holiday pay arrangements. If you want us to help you in assessing your current position, please get in touch.

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