On 4th October 2023 the Supreme Court provided its findings on Chief Constable of the Police Service of Northern Ireland and another v Agnew and others.
The case dealt with the issue of how far back an employee could claim for backdated holiday pay. Such a claim can be brought against an employer as a deduction of wages claim.
What is Backdated Holiday Pay?
There may be a need to backdate holiday pay owed to an employee if an employee has been underpaid for holidays in the past. Of late, the most common reason for underpaid holiday has been in situations where an employee has just been paid their basic pay when taking holiday, excluding regular overtime and/or bonuses/commission payments. Paying basic pay had previously been standard practice, however, through caselaw, this has evolved and now when an employee takes holiday, any past commission earnt or regular overtime worked, should be included in the calculation of the employees’ average weekly pay for the purpose of holiday pay. Chief Constable of the Police Service of Northern Ireland and another v Agnew and others, revolved around the argument that there had been an underpayment of holiday pay, as regular overtime had not been included in the holiday pay calculation.
How Far Back Could an Employee Claim Backdated Holiday Pay?
Previously, in the Bear Scotland v Fulton case, the EAT concluded that deductions for the purposes of a wage claim could only be linked in a series, if there was a gap of three months or less between each deduction. And this had been the stance until the finding in Chief Constable of the Police Service of Northern Ireland and another v Agnew and others. The previous position served to limit the amount payable by an employer.
What are the New Rules for Backdated Holiday Pay?
In Chief Constable of the Police Service of Northern Ireland and another v Agnew and others, the Supreme Court has decided that a series, for the purposes of such a claim, does not require a contiguous sequence of deductions, and a gap of more than three months between deductions does not necessarily bring a series to an end. As such, an employee can claim for a series of deductions even if there are more than three months between those deductions. This effectively removes the previously believed barrier to backdated claims.
Nevertheless, at present, there is some protection afforded to employers in Great Britain (not Northern Ireland) to a never-ending claim, as presently under the Employment Rights Act 1996, a claim for unlawful deduction from wages can only look back at deductions over a maximum period of two years. And a claim for unlawful deductions must still be brought within 3 months from the date of the last underpayment of holidays.