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Holiday pay: Employers should heed NI Court of Appeal case as courts in England, Wales and Scotland likely to follow suit

Decisions made by the courts in Northern Ireland are not binding in England & Wales, but in a persuasive decision likely to affect the outcome of future cases in England, Wales and Scotland, the NI Court of Appeal has overturned previous EAT rulings that limited what is included when calculating holiday pay and confirmed that workers do not lose the right to claim historic arrears of holiday pay where there was a gap of more than three months between underpayments.

In Chief Constable of the Police Service of NI and others v Agnew a claim for underpaid holiday pay was brought by 3,380 police officers and 264 civilian employees. They argued that the police force were wrong to calculate holiday pay on ‘basic pay’ not by reference to ‘normal pay’ which includes both basic pay, overtime pay and other allowances.

The NI Court of Appeal concluded that the EAT's analysis in Bear Scotland was incorrect and had led to some 'arbitrary and unfair' calculations. 

As a result, the workers in this case can recover underpayments going back to the start of their employment (or 1998 if earlier which is when the Working Time Regulations came into force).

In England, Wales and Scotland, claims have a two year backdated limit, thanks to The Deduction from Wages (Limitation) Regulations 2014. Based on the supposition that the regulations may breach the EU principles of equivalence and effectiveness the 2014 regulations could now be challenged as being unlawful.

Employers, particularly those who employ staff in Northern Ireland, should take heed of this judgement. Any claims brought in NI, where the two year backstop does not apply, and elsewhere in the UK where the backstop only currently applies, may be costly if employers have consistently only used a basic pay calculation for the first 20 days of the employee’s annual entitlement. Claimants only have three months from the date of the last underpayment to bring a claim, so employers should act sooner rather than later to avoid a potentially hefty charge.

Posted on 4 July, 2019 by Ortolan

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