Supreme Court rules on holiday pay claims – Explained

For the second time in just over a year, the Supreme Court has been asked to deliver a judgment on a claim related to holiday pay, which has the potential to significantly impact the claims that may be brought for non-payment by employees.

The Supreme Court’s latest decision in Chief Constable of the Police Service of Northern Ireland v Agnew relates to situations where an employee is claiming for non-payment of holiday pay and is looking to claim back for a “series” of deductions.

Before exploring the facts of this case in detail, it is worth considering what was previously, understood to be the general position for making such claims.

Under the Employment Rights Act, an employee has the possibility of claiming against an employer where they have been underpaid. There is a strict time limit of three months from the date of such an underpayment, for a claim to be brought. The Tribunal would, however, allow for claims to be brought for deductions going back more than three months, provided that they formed part of a “series” of deductions. However, the rule was generally understood to mean that to be considered a series of deductions, there could not be a gap of more than three months.

This is the key point that the decision in the Agnew case addressed. The case concerned police officers in Northern Ireland, who brought claims against the police service relating to underpaid holiday pay, going back as far as 1998. It was accepted by the Respondent that they had underpaid holiday pay, as this had been incorrectly calculated. However, the Respondent argued that the police officers could not claim back to 1998, as the relevant Regulations in Ireland restricted claims to underpayments made three months before the claim was brought, and as above, that for a series of deductions to exist there needed to be a gap of no more thanthreemonths between the deductions.

A Industrial Tribunal found in favour of the police officers, and the claim was appealed numerous times all the way to the Supreme Court. The Supreme Court dismissed the appeal, again finding in favour of the police officers.

When considering what correctly amounted to a “series” of deductions, the Court found that the fact that there was more than three months between deductions did not prevent them from forming a series. The Court assessed the meaning of the word “series”, which it found depended entirely on the context rather than being limited to a gap of three months.

When determining whether or not a claim in respect of more than one deduction correctly constitutes a series of deductions, this is a question of fact that a Court or Tribunal would need to determine. This should be done by reference to all of the circumstances of each individual case, taking into account the similarities and differences in the deductions, the frequency, size and impact of the deductions, how the deductions were made, and what links them together. It is not necessary for there to be a specific pattern, and the fact that there may be more than three months between the deductions does not prevent them from being linked for the purpose of bringing a claim.

This judgment, therefore, whilst not specifically influencing the way in which employers should calculate holiday pay to the extent that the 2022 judgment of Harpur Trust v Brazel did, should still act as a warning to employers. If they face a claim by an employee or former employee for non-payment of holiday pay, provided that the claim is brought within three months of the latest alleged deduction, the employee may now be able to claim back for previous non-payments if they can show that these formed a “series” of deductions on the facts. It will no longer be open to the employer to argue that the employee is barred from claiming them because there were more than three months between the deductions.

Whilst employers need to be cautious of this judgment, there is one small piece of comfort that they should be aware of. In the Agnew case, it was possible for the employees to claim back for deductions going back to 1998. This was a Northern Ireland case, based on Northern Irish laws. In the English and Welsh equivalent of these laws, there is a specific provision which states that even where claiming for a series of non-payments, there is a two-year backstop on claims. This would therefore prevent an award for holiday pay going back further than two years. Such a provision does not exist in the Northern Irish laws which the Agnew case was based on, so the police force could not rely on this in the same way that an English company may be able to.

If you would like further clarification on this case, or would like guidance through the complex law relating to holiday pay claims, Davies and Partners’ specialist employment team would be happy to help. 

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