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The journey continues for holiday pay

October 6, 2023

Reality TV shows love a good journey. Whether it’s learning to tango on Strictly, baking bread without a soggy bottom on GBBO or finding inner resilience and strength on I’m A Celebrity, the whole experience is painted as not being worthwhile in the slightest unless you have a splendid, shiny story arc to show for it at the end.

So a worker’s right to holiday pay under UK employment law would seem to be an ideal contestant for the next series of any of these shows. And just to get TV producers even more interested, holiday pay’s journey has extended this week, with what is a very important decision taken by the Supreme Court (happily not currently the subject of a Channel 5 Saturday night vehicle: “Britain’s Next Top Judge!”).

In the case of Chief Constable of the Police Service of Northern Ireland and anor v Agnew and ors, the court has confirmed a worker’s claim for historic underpayments of holiday pay can still proceed even if there are gaps of more than three months between instances of any of those unlawful deductions.

The claim related to complaints brought by police officers and civilian employees working in the Police Service of Northern Ireland. Actions had been raised by these workers (and accepted as being valid) on the ground their entitlement to holiday pay had been calculated by reference to basic pay only during periods of annual leave.

Following the decision in the case of Bear Scotland v Fulton, the Employment Appeal Tribunal had ruled that all monies to which a worker was entitled to by way of “normal remuneration” ought to be factored in when calculating holiday pay.  However, the EAT’s decision in Bear Scotland also set out that:

  1. A claim for underpayment of holiday pay must be brought within 3 months of the date of that underpayment;
  2. Where there was a series of deductions from holiday pay, the claim needed to be raised within 3 months of the last of those underpayments; and
  3. Where there was a gap of 3 months or more between instances of underpayment in any series, then the underpayments which arose prior to that 3 month gap could no longer be pursued and would be time-barred.

The final point here was subject to a lot of criticism as many felt that imposing a 3 month limit between deductions in any series was somewhat arbitrary.

The Agnew case has now altered this position. Accordingly, the new position when considering a worker’s claim for backdated holiday pay is:

  1. Has the claim been brought within 3 months of the last deduction in a series? If so, the claim will have been brought in time.
  2. The fact that particular deductions in any series occurred more than 3 months apart would not prevent the earlier deduction(s) from forming part of the claim.
  3. The essential matter is whether the worker can show the deductions do form part of the same series. This would be a question of fact based on all relevant circumstances, which would include:
  • the similarities and differences of the deductions;
  • their frequency, size and impact;
  • how they came to be made and applied;
  • what links them together, and
  • all other relevant circumstances.

In Agnew, as the claims were all based on underpayment of holiday pay and that underpayment had been caused by an erroneous calculation made by the Police Service, then they formed part of the same series and the workers were entitled to pursue a claim based on all deductions made in that series. In regards to these claims, this meant claims could extend back as far as the date the Working Time Regulations were introduced, 1st October 1998.

This last point may cause alarm to employers. However, there is a degree of security provided in Great Britain (but not Northern Ireland) in light of the Deductions from Wages (Limitation) Regulations 2014 which restrict any claim for backdated pay (holiday or otherwise) to the 2 year period immediately prior to the date the claim is raised. While that may provide some comfort, a situation where an employer has a number of employees seeking to recover up to 2 years underpaid holiday pay may still be costly.

The decision does not particularly effect the way in which employers’ require to calculate holiday pay or the types of payments that need to be taken account of when doing so. Rather, it simply creates a potential bigger liability for those employers who have not been doing this properly. As such, ensuring that holiday pay is accounted for properly to employees is the big lesson to be learned here.

This is the latest in the holiday pay saga. As a reminder, case law now confirms:

Stringer and others v HM Revenue & Customs; Schultz-Hoff v Deutsche Rentenversicherung Bund  Annual leave continues to accrue during periods of long-term sick leave
Plumb v Duncan Print Group Ltd UKEAT/0071/15 Annual leave can be carried over for 18 months from the end of the leave year in which it accrues where the worker is unable to take it as a result of long-term sick leave
NHS Leeds v LarnerA worker is entitled to reschedule the 4 weeks initial European leave accrued in each leave year where they are unable to take that leave due to sickness
Bamsey v Albon Engineering & Manufacturing Plc   Guaranteed compulsory overtime is covered in “normal working hours” under the Employment Rights Act 1996 and therefore is to be included in holiday pay in respect of the full 5.6 weeks’ leave provided for in the Working Time Regulations 1998
Williams and others v British Airways plcHoliday pay accrued under European law (i.e. the initial 4 weeks of leave accrued in any leave year) should be based on “normal remuneration” a worker receives while at work and not be restricted to basic pay
Lock v British Gas Trading LtdCommission which formed part of the worker’s normal take home pay needed to be accounted for when calculating holiday pay for the initial 4 weeks of leave accrued under European law
BEAR Scotland v FultonAll normal remuneration needs to be accounted for when calculating holiday pay due for the initial 4 weeks of leave accrued under European law   Non-mandatory overtime and travel allowances which form part of a worker’s normal remuneration should be included in that calculation
Dudley Metropolitan Borough Council v Willetts and othersVoluntary overtime pay, out-of-hours standby payments and call-out payments should be included in calculating holiday pay for the initial 4 weeks of leave provided under European law where they form part of normal remuneration
East of England Ambulance Service NHS Trust v FlowersVoluntary overtime pay should be taken into account by the employer when calculating the four weeks’ paid leave under European law, so long as the payments are sufficiently regular and paid over a sufficient period.
Police Service of Northern Ireland and anor v Agnew and orsA claim for underpayment of holiday pay can include instances of underpayment which occur more than 3 moths before the subsequent deduction relied upon

So as the above table shows, holiday pay’s journey has been a significant one which has taken place over a number of years. Whether the decision in Agnew sees it reach the end of that journey is debatable. But after all these years of litigating on the subject, surely it deserves something of a break from it all- does a trip to Love Island beckon?

If you have any questions on this on any other area of Employment law, please get in touch with Blackadders Employment Team, working in Aberdeen, Dundee, Edinburgh, Glasgow and across Scotland. 

The opinions expressed in this site are of the author(s) only and do not necessarily represent the opinions of Blackadders LLP.

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