Show notes
Join Ian Pace and Alice Evans in discussing the recent Supreme Court ruling in the case of Chief Constable of Police Service of Northern Ireland v Agnew, which focuses on the time limitation period that's imposed on any deductions to an employee's holiday pay.
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Transcript
Ian Pace
Hi there and welcome to the employment insights podcast. This is the six podcasts in our series, and we discuss hot topics in employment law and what they mean for you. And your business. My name is Ian Pace. I'm a partner in the Manchester employment team. I'm joined today by my colleague, Alice Evans, who is a trainee solicitor based in our Leeds office. Hi there, Alice.
Alice Evans
Hi, Ian.
Ian Pace
Today, we're going to discuss the recent supreme court ruling in the case of chief constable of the police service of Northern Ireland v Agnew, which focuses really on the time of meditation period that's imposed on any deductions to an employee's holiday pay.
And in particular, this is a really important case because it actually overrules what was the previous landmark ruling in Bear Scotland v Fulton.
Really, before we get going in, we really need to further understand the implications of the ruling. So first, let's look at holiday pay entitlements itself.
And just take a step back and look at that decision in the case of, Bear Scotland v Fulton. So, Alice, could you just give a bit of a recap in respect of, holiday pay incisement under the working time regulations.
Alice Evans
Yeah. Of course. So if we look at the work and time regulations to start off with. Regulations 13 and 13a, sets out the minimum amounts of annual leave to which workers are entitled full to, that amounts to 5.6 weeks per leave year, which is subject to a cap of 28 days.
And then if we look at regulation 16:1, that entitles the worker to be paid for such periods of annual leave. The entitlement is to be paid a week's pay for each week of annual leave. And calculation of the payment owed to a worker for annual leave is a topic subject much discussion and one we have touched on in previous articles and, podcasts.
Ian Pace
And we've mentioned there about Scotland v Fulton, could you just give a recap again and where we were before this new case of Agnew?
Alice Evans
Of course. So this as discussed was a precedent case really on this topic.
This set the precedent for a series of deductions to underpaid holiday pay claims back in 2015.
Judge Langstaff found that in order to establish a series of deductions, There had to be a factual and temporal link between the elements in the series.
The employment appeal tribunal then ruled that by a period of more than three months had elapsed between individual deductions or a lawful payment in between said deductions.
The chain of a series of deductions would in fact be broken.
This meant that when a tribunal's jurisdiction over a deduction had been lost, it could not be simply reinstated by claiming a deduction was part of the same series.
This significantly reduced liability of many employers when defending holiday pay claims and informed holiday pay strategy for employers in Great Britain from that date.
Ian Pace
Okay. So we are quite clear then from Scotland, in terms of where limitations lay and, where there was a period of more than three months before between the individual deductions, we could draw a line in the sun there and try and limit liability in the perspective of an employer. That's clear. So how's that changed now from Agnew? Give us a bit of background in terms of Agnew.
Alice Evans
So the Agnew case, which we're discussing today, was a claim in chief counsel, the police service of Northern Ireland and another verdict versus Agnew as mentioned by Ian before.
This was brought by approximately 3700 police and civilian staff. All employed by the police service of Northern Ireland.
The claim was for holiday pay, which they alleged had been occurring way back from 1998.
The claim was based on the statutory provision that employees have the right to be paid normal pay during their leave rather than basic pay, something which we've previously looked at.
The Northern Irish Industrial tribunal held that the overtime payment should be included in the calculation of normal pay for the purpose of that annual leave entitlement.
This was accepted by the police service of Northern Ireland. However, the issue then came to light as to how much of this pay could be claimed.
The police service rejected the claim for pay as far back as 1998 on the basis that the majority of the money claim was time barred as it did not constitute a series of deductions, as more than three months had elapsed between those deductions. This followed the ruling that we just previously got set out in there, Bear Scotland v Fulton.
Ian Pace
Right. Okay. So, before the industrial tribunal in Northern Ireland, the PS&I agreed that it should include normal pay, not just basic pay. So that's element one, an element here is they rely on Bear Scotland, and they say no.
Actually, we're going to limit liability on the basis of Bear Scotland because of the three month time limit. Okay. So I think I'm right in saying that the staff, and the police appealed that decision to the Supreme Court. Is that right?
Alice Evans
Yes. That's right.
Ian Pace
And what happened in the Supreme Court? What was the decision?
Alice Evans
So the Supreme Court upheld the original decision and ruled that a series of deductions or underpayments with an interval of more than three months didn't necessarily mean that the relevant series had been broken. Which broke away from the decision in Bear Scotland.
The judgment stated that a series is not necessarily broken by a gap of three months or more between the deductions nor is a series broken by a lawful payment. If that lawful payment comes about by virtue of the common fault or unifying or central vice that underpins the series.
So considering the three month rule there, the Supreme Court observed that in general, a claim for unpaid wages must be brought within three months of the relevant act or failure to act.
However, legislation provides an exception to this, allowing a claim to be bought within three months of the latest in a series of deductions.
That's under the employment rights order 1996, and the employment rights act 1996.
The court held there that the purpose of this exception is to protect employees, some of whom may be vulnerable against the short three month time limit. Where they suffer repeated deductions from their wages.
So the notion that a three month gap between deductions will automatically break the series run contrary to this purpose is what the Supreme Court ruled here. And they said that it might produce unfair consequences.
Supreme Court also noted that requiring an employee to bring a new claim every three months, rather than one single claim in respect of the whole series. Would impose a wholly unnecessary burden on the employee.
So the existence of a series of deductions and whether that series is broken, the Supreme Court ruled must be judged on an individual case by case basis with all relevant information being taken into account.
Ian Pace
What type of relevant information needs to be taken into account?
Alice Evans
So a range of things including the free constituency size and impact of the deductions, their similarities and differences, what links them together, and how they came to be applied and any of the relevant circumstances.
Ian Pace
Okay. That makes sense. And, what did the Supreme Court say about the court of appeals decision, about the lawful payment breaking a chain in deductions?
Alice Evans
Yeah. So the Supreme Court endorsed that decision from the court to appeal.
Basically, as we've discussed, the lawful payment by the employer does not necessarily break that series of deductions.
Ian Pace
Okay.
So all claims in this case were made based on the reference to the holiday pay period in reference to normal pay rather than basic pay. Yeah. And that was accepted. The court ruled in that case thinking right and saying there was a common fault. And therefore, that three month time limit that was on the Bear Scotland, that was actually invalid.
What was the impact to the PS&I for that, financially?
Alice Evans
So a huge impact in, in this instance here is potentially increase the employees claim from 300,000 to 30 million.
Ian Pace
Okay. So it's a it's a massive impact potentially for employers. I mean, the direct impact of this decision, The court of appeal decision was really confined to Northern Ireland, and that's obviously a separate jurisdiction.
But the Supreme Court decision, which is now now now being released. That's actually binding not only in Northern Ireland but across the whole of the UK. So that does need to be followed in the courts of England Well, Scotland, and Ireland.
What does it mean for you? Well, the Supreme Court acknowledges that while the sums involve for each claimant, In this case, we're particularly small.
The outcome has a massive bearing them really on thousands of holiday pay claims every year and the impact that's gonna be really significant.
Basically, what this means for you as an employer is the decision makes it easier for employees to make holiday pay claims stretching by much, much, much further than the original time limit, which was limited to that three month period in the first Scotland.
Employee's holiday pay fails to take into account regular overtime and whose holiday was taken or paid intervals at more than three months will now be able to argue on the back of this case. That a series of unlawful deductions has been made, clearly subject to the facts and circumstances of the case.
In the UK, the deduction from wages regulations, those actually limit liability up to two years for any whole day pay claims. So in the UK, reductions before that period can't actually be be claimed.
It's also worth noting, isn't it that in the the judgement, the ruling may actually extend to deduction from wages and other relevant renumeration. So this might not only apply to holiday pay claims, but a milestone. Apply to more general deductions that have been made from wages.
What it does actually mean though for employers is that it emphasizes the need for employers to ensure that any holiday pay is calculated lawfully, to ensure that any potential liability which may arise, in the future is, limited as far as possible.
One thing for us to say is that if you do need any assistance with that. We have a holiday pay team here at Weightmans, who are able to undertake audits of your previous holiday pay calculations, to to calculate potential exposure and to actually provide advice and respect of how to provide calculate holiday pay going forward. So please do let us know if you need any assistance on that or anything other employment law wise or otherwise.
All that's left for me to say is thank you for, joining us today. And thanks Alice for that really comprehensive review of Agnew.
If you do need any further advice, then please do feel free to contact either me or a member of the Manchester or wider employment team. Thanks very much for listening.