Holiday pay: series of deductions and back-pay

A recent case from the Court of Appeal in Northern Ireland Chief Constable of the Police Service of Northern Ireland and Northern Ireland Policing Board v Agnew and ors has considered a number of issues in relation to holiday pay including the meaning of “series of deductions” and whether annual leave under the Directive should be taken first.  The case concerned an acknowledged failure to pay appropriate amounts of holiday pay, having paid basic pay rather than normal pay to include allowances and overtime, dating back to 23 November 1998 (when the Working Time Directive was implemented by the UK) or the start of employment if later.

The Court held that whether there is a series is a question of fact to be decided in each case.  A “series” does not mean that each deduction occurs at exactly the same time interval and that provided it happens with sufficient frequency of repetition it can occur at different time intervals and for different amounts.  The Court considered it was necessary to identify the alleged series and in this case it was a series of unlawful deductions in relation to holiday pay.   Each unlawful deduction was factually linked to its predecessor by the common fault or unifying vice that holiday pay was calculated by reference to basic pay rather than normal pay.  That factually linked all payments of holiday pay consistently since 23 November 1998. 

The Court held that a series is not ended, as a matter of law, by a gap of more than 3 months between unlawful deductions or by a lawful payment i.e. where the claimants were paid appropriately while at work between the various holiday payments.

The Court also looked at whether annual leave should be taken in any particular sequence as suggested in Bear Scotland i.e. with the four weeks under the Directive to be taken first with the intention of increasing the chance of a gap of more than three months between the underpayments of holiday pay and a breach of a series.  It disagreed with this reasoning and did not consider there was any requirement that leave from different sources is taken in a particular order.

Although this decision is not binding on the tribunals in Great Britain, it will be persuasive authority for any future appeal against the reasoning in the EAT’s decision in Bear Scotland.  More concerning, is that if there is an appeal to the Supreme Court, which seems likely given the amounts involved, any decision will be binding on employers in Great Britain. 

In Great Britain in July 2015 the government introduced a 2 year cap on backdated claims for unpaid holiday pay significantly limiting an employer’s liability.  Northern Ireland did not introduce similar legislation and therefore the potential liability for backdated pay is much greater.  The current estimate of the claims for the 3,700 police officers and civilian staff is £40million.

For more information, please contact Nick Hurley.