DUE TO ESSENTIAL MAINTENANCE OUR PHONE LINES AND EMAIL
SERVERS WILL BE INTERMITTENT UNTIL NOON FRIDAY 25TH OCTOBER.
We apologise for any inconvenience.Close
The proper payment of holiday pay had been a legal cauldron that’s been bubbling away for some time. Previously, the European Court and the Employment Appeal Tribunal (EAT) delivered decisions in 2014 in the cases of Lock v British Gas Trading Ltd and Bear Scotland Ltd v Fulton & Others respectively. These and other successive cases on holiday pay essentially changed the framework for paying employees during periods of annual leave. They identified ‘normal pay’ as the basis for calculating pay during periods of annual leave.
It is now accepted that ‘normal pay’ includes normal and regular payments above and beyond basic pay such as overtime and allowances that are paid within an appropriate reference period prior to the holiday. However, a crucial feature of the Bear Scotland decision was that the Court decided that any break of 3 months or more between incorrect payments would break a series of deductions and limit any backdating to that point.
In addition to the Courts position on backdating The Deduction from Wages (Limitation) Regulations 2014 came into effect in January 2015 in Great Britain limiting any backdating of holiday pay claims to 2 years.
In 2018 the Industrial Tribunal in Northern Ireland found in favour of nearly 4000 police officers (PSNI) and civilian employees regarding their holiday pay claims in the case of Agnew. In summary the Tribunal found that they had only been paid their basic pay and that any claims could be backdated to 1998. In a critical and fundamental departure from the Bear Scotland decision the Tribunal decided that any break of 3 months would not automatically break a series of deductions.
This decision has recently been appealed in the Northern Ireland Court of Appeal. The appeal was made regarding a number of defined points.
The alternative to bringing a claim under ERO was to present their claims under the Working Time Regulations (NI) 1998 & 2016 (WTR’s). The issue with only allowing the Police Officers recovery through the WTR’s as opposed to the ERO is that the WTR’s did not allow for backdating in respect of a series of deductions. While the Court found that the Police Officers were not ‘workers’, the principle of equivalence in EU law meant that words could be read into the WTR’s to allow recovery in respect of a series of deductions.
While the Court of Appeal decision in Agnew has fundamentally departed from the Great Britain case of Bear Scotland regarding back payments for annual leave, there is nothing fundamentally new in regard to the consideration of ‘normal pay’ in a calculation of holiday pay. However subtle changes to the method of calculating holiday pay may have implications even for those employers who took heed of the impact of Bear Scotland in 2014. While the Agnew case has clarified some aspects of holiday pay, it has also left unresolved questions regarding the practical application of calculating holiday pay. What constitutes ‘regular pay’ and ‘reference periods’ are as undefined as ever.
All employers who have not been paying proper holiday pay would be well advised to start doing so. Failing to do so, will certainly create an ongoing financial liability that has the potential to be backdated to 1998. Those who have been including ‘normal pay’ in their calculations will need to revisit their calculations to make sure they are compliant with the Court’s decision.
However, it should be repeated that Claimants (employees) are still required to lodge any valid holiday pay claim within 3 months of the last in a series of deductions. If any underpayments are historical and are followed by a period of proper payment of more than 3 months, then those Claimants will face the normal difficulties associated with pursuing litigation outside the limitation period.
This judgement has significant repercussions for “NI Plc” and the PSNI have not yet decided on lodging a further appeal to the Supreme Court.
To find out more about Holiday Pay Entitlement and how our Employment Law Division can assist, please contact Ciaran McGlone on 028 9032 9042