The Supreme Court hands down judgment in case which has significant implications for holiday pay litigation across the UK.
In the long-awaited judgment, the Supreme Court has confirmed that claimants can recover underpaid holiday even where there has been a gap of more than three months between deductions.
How far back should holiday pay claims go?
The case of Chief Constable of the Police Service of Northern Ireland and anor v Agnew and ors concerns a large number of Northern Irish police officers and civilian staff. They had historically been paid their basic pay during holiday. However, under EU case law they should have been paid their "normal remuneration" for the first four weeks of annual leave. As their normal remuneration would have included compulsory overtime, they had effectively been underpaid for their holiday.
The workers brought claims seeking their underpaid holiday from 1998 onwards. Both sides agreed there had been an underpayment. In issue was the question of how far back the workers were entitled to go in their claim.
Series of deductions
Both in Great Britain and Northern Ireland, it is possible to enforce holiday pay rights using an unlawful deduction from wages claim. The claim must be brought within three months from the date of the deduction, or from the last in a series of deductions where there is more than one disputed payment.
In Agnew, the employer argued that the circumstances under which payments comprise a 'series' for the purposes of an unlawful deductions claim, is limited in ways which would have removed many of the workers' historic underpayments from the Tribunal's jurisdiction. Central to this argument was the Employment Appeal Tribunal (EAT) decision in the Bear Scotland case. In that case, the EAT found that where there is a gap of more than three months between any two payments in a series of underpayments, this "breaks" the series so that the worker is prevented from going further back in time in their claim. This rule has been subject to criticism since the Bear Scotland decision, with many commentators expecting it to be overturned by a higher court in the event of future litigation.
In the Agnew case, both the Northern Irish Industrial Tribunal and the Court of Appeal found in favour of the workers, holding they could recover underpaid holiday as far back as 1998. The employer appealed to the Supreme Court on several grounds, including on this issue.
Supreme Court judgment
The Supreme Court upheld the Court of Appeal's judgment, finding in favour of the workers. The question of whether multiple payments are linked as a series is a question of fact. It is not the case that a series of deductions will automatically be broken by a gap of more than three months between payments, or a correct payment between two incorrect payments.
An important purpose of the series extension is to allow workers to complain about acts or failures, where appropriate, which occur outside the three month period preceding the complaint. There must be an act or failure to act which has occurred within the three month period, but the complaint is not necessarily confined to that act or failure. If there is a sufficient connection between the events in the series, the worker may complain about them all. The gap between deductions is not determinative of whether the series has been broken, but may be indicative of whether the events constituted a series.
Application
This case has attracted widespread publicity since judgment was handed down, not least because of the monetary value of the claim (£30 million). It is significant to employers in Great Britain, who may no longer rely on the Bear Scotland series of deductions rule to limit the value of a holiday pay claim.
However, it is important to note that the maximum limitation period for holiday pay claims in Great Britain is capped at two years. This represents a policy decision to limit holiday pay claims to a rolling period two years prior to the commencement of the Tribunal proceedings. This means that employers based in England, Scotland and Wales are unlikely to face the same huge holiday pay bill as we have seen in the Agnew case, albeit the judgment is likely to inform employer strategy around correcting underpaid holiday.