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No loss of right to claim holiday pay arrears where gap of more than three months
Chief Constable of the Police Service of Northern Ireland v Agnew
Workers do not lose the right to claim historic arrears of holiday pay where there was a gap of more than three months between underpayments holds the Northern Ireland Court of Appeal.
Industrial tribunal claims were lodged in Northern Ireland by over 3,000 police and civilian employees against the Police Service of Northern Ireland (PSNI) in relation to holiday pay being calculated by reference to ‘basic pay’ rather than by reference to ‘normal pay’ (which includes basic pay, overtime and various other allowances). The claims date back to when the Working Time Regulations 1998 (WTR) were first introduced. Employment law in Northern Ireland largely mirrors that of the rest of the UK but with some exceptions.
A tribunal upheld the claims and, in so doing, held that the decision in Bear Scotland v Fulton was wrong to find that a gap of three months or more would automatically break a ‘series of deductions’ for the purposes of a claim for holiday pay. The PSNI appealed and, as this was a case in Northern Ireland, it went straight to the Northern Ireland Court of Appeal rather than the Employment Appeal Tribunal.
Northern Ireland Court of Appeal decision
The appeal was dismissed.
The Court of Appeal of Northern Ireland held that a ‘series of deductions is not ended, as a matter of law, by a gap of more than three months between unlawful deductions nor is it ended by a lawful payment’. To hold otherwise would, said the court, lead to ‘arbitrary and unfair results’. Instead, identification of the factual link in an alleged series of deductions is what determines whether correct payments of holiday pay breaks the series. If a series of payments is broken by a lawful payment of holiday pay, if the lawful payment comes about ‘by virtue of the common fault or unifying or central vice that holiday pay was calculated by reference to basic pay rather than normal pay’ then the series of deductions is not broken.
Other findings to emerge from the Court of Appeal decision include the following:
- In Bear Scotland the EAT held that EU leave is deemed to be taken first, followed by UK leave (the extra 1.6 weeks under reg. 13A of the WTR) and then contractual leave. Not so said the Court of Appeal. Workers are entitled to all leave from whichever source and there is no requirement for certain types of leave to be taken in any particular order. Applying the approach in Bear Scotland would, said the Court of Appeal, inevitably increase the chances of creating a break of three months or more between underpayments of holiday pay.
- Fixing an arbitrary reference period for the purposes of calculating holiday pay (12 weeks being commonly used) was incorrect. Instead the reference period should be determined by reference to each claimant and ‘be long enough to be representative of the claimant’s working pattern’. It is a fact-sensitive question. The Court of Appeal encouraged the parties in this case to agree ‘a pragmatic, administration-friendly method for calculating and paying “normal pay” based on averages taken over a rolling 12-month period immediately preceding the period of leave’.
Link to judgment: https://www.bailii.org/nie/cases/NICA/2019/32.html
The Northern Ireland Court of Appeal’s finding in relation to Bear Scotland will have significant cost implications for employers in Northern Ireland – and those employers who have employees primarily working in Northern Ireland. It potentially allows such employees to pursue holiday back pay claims as far back as 1998 when the WTR came into force – because the two-year backstop on the ability to claim holiday pay does not apply in Northern Ireland. While the legality of the two-year backstop was questioned by the ECJ in King v Sash Windows, the case settled before returning to the UK Court of Appeal so the two-year backstop remains.