NI Court of Appeal Rejects EAT’s position on what constitutes a ‘series of deductions’ in holiday pay claims

Chief Constable of the Police Service of Northern Ireland and Northern Ireland Policing Board v Agnew and others [17.06.19]

Date published

20/06/2019

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This week the Northern Ireland Court of Appeal confirmed that in a claim for holiday pay, a series of deductions was a question of fact, which is in stark contrast to the position in Great Britain (GB).

This decision has a significant impact on employers and compensators, as Northern Ireland (NI) is not subject to the Deduction from Wages (Limitation) Regulations 2014, which limits how far back employees can go in making claims for holiday pay and as such could prove extremely costly.

Background

The claimants contended that their employers’ decision to pay holiday pay at their basic rate of salary, ignoring payments received for overtime worked, amounted to an unlawful deduction from wages.

The Employment Tribunal (ET) agreed, confirming that overtime payments and allowances should have been included within the calculation of holiday pay. The ET stated that there could be ‘no rational argument’ for contending that voluntary and non-guaranteed overtime should be excluded from a holiday pay calculation so long as they are sufficiently regular to form ‘normal pay’.

Significantly, the ET rejected the English Employment Appeal Tribunal (EAT) position that a three-month gap between underpayments of wages breaks a ‘series of deductions’. The ET held that the EAT’s interpretation of ‘series’ should not be followed in NI and concluded that what constitutes a series of deductions must be considered on the circumstances of each individual claim.

The defendants appealed. Whilst accepting they had failed to calculate employee holiday pay by reference to ‘normal pay’, they invited the NI Court of Appeal to determine whether a series of deductions can be broken by either a break of three of more months between unlawful deductions (GB position) or by a lawful payment to an employee.

Decision

The court concluded that

A series is not, ended, as a matter of law, by a gap of more than three months between unlawful deductions nor is it ended by a lawful payment.

In the alternative, the court agreed with the ET’s finding that whether there is a ‘series’ of deductions is a question of fact to be decided in each case and in this case there was a factual link between the alleged series of underpayments. They all arose due to the ‘common fault of paying basic pay as holiday pay regardless of any consideration of overtime or allowances’.

The case has been referred back to the ET to conclude.

Comment

This case demonstrates the increased exposure employers in NI face when compared to their counterparts in Great Britain (GB) and highlights the stark implications for businesses who fail to ensure that employees are receiving their normal pay while on holiday leave.

To minimise risk we recommend that businesses review their policies and working practices relating to the calculation and payment of holiday pay for all staff. An employee’s salary whilst on annual leave should reflect their ‘normal’ salary. Employers should ensure they take steps to proactively investigate and address concerns where a consistent reduction in pay whilst on leave is identified.

Given the NI Court of Appeal’s clear rejection of the EAT’s position, it remains to be seen whether this matter will be appealed to the Supreme Court.

Related item: Traps for the unwary: employment law in Northern Ireland