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Case: Chief Constable of the Police Service of Northern Ireland v Agnew
Thousands of Claimants brought claims against the Police Service of Northern Ireland for unlawful deductions of wages and underpaid holiday pay.
It was common ground that the Claimants had been underpaid, as their holiday pay had been calculated on the Claimant’s basic pay only without taking into account factors such as overtime. The issue in dispute was how far back the claims for underpaid holiday pay could go.
Relying on the rule established in Bear Scotland Limited v Fulton, the Police Service argued that a series of deductions could be broken by a gap of three or more months between deductions. This issue formed the basis of the appeal at the Supreme Court.
The Supreme Court issued its judgement in October 2023, overruling the Bear Scotland 3-month rule and holding that a gap of three months or more does not necessarily break or end the series of deductions.
The Supreme Court also held that what amounts to a “series of deductions” is a question of fact. A correct payment being made, for example, will not automatically prevent unlawful deductions either side of that correct payment from forming a series of deductions. Tribunals will need to consider all circumstances including the frequency, size and impact of the deductions, their similarities, and what links them. In Agnew, the deductions were all linked by a common fault i.e. payment at a basic rate without inclusion of other remuneration such as overtime. As such, the Supreme Court held that the deductions were linked and formed a series of deductions.
This case is also a useful reminder that holiday pay must include “normal” remuneration. Unhelpfully for employers however, this will be considered on a case-by-case basis; the Supreme Court maintained that what constitutes normal remuneration is a question of fact, and so is the reference period by which it is calculated. The Supreme Court did however appear to endorse the Court of Appeal’s encouragement of the use of a 12-month reference period.
Key Takeaways and Reminders:
- Previously, employers relied on Bear Scotland to argue that a three-month gap broke the chain of deductions, limiting any liability. Agnew has now clarified that this is not automatically the case, and that what amounts to a “series of deductions” will be a question of fact.
- In Great Britain, a 2-year backstop applies to claims for unlawful deductions of wages, including claims relating to holiday pay. This means that such claims cannot recover more than 2 years of losses. The 2-year backstop does not apply to Northern Ireland, meaning the Agnew ruling will have an even greater impact on Norther Ireland employers.
- Agnew is a useful reminder that holiday pay must include “normal” remuneration, for example regular overtime.
If you are looking for advice regarding holiday pay or require assistance with a Tribunal claim, please do not hesitate to get in touch with our Employment team.
