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Holiday Pay changes could be on the horizon pending Supreme Court ruling

The case of Chief Constable of The Police Service of Northern Ireland and another v Agnew and others was heard in the Supreme Court from 14 to the 16 December 2022. Depending on the outcome of the case its effect could make it easier for workers to claim for historic underpayments of holiday pay.

The decision on this case is not expected until later in 2023, however in readiness for the decision, businesses should consider evaluating their holiday pay practices now and looking back over the last few years to identify whether there have been any potential underpayments of holiday pay.

Currently, if an employee’s holiday pay is incorrect, they must bring a claim forward within three months of when the deduction was made or, if a string of underpayments has been made, within three months of the last time they were underpaid for their holiday.

Case facts: Chief Constable of The Police Service of Northern Ireland and another v Agnew and others

In 2019, the Court of Appeal in Northern Ireland (NICA) found staff had not received the holiday pay they had been entitled to for many years. This meant that the Police Service of Northern Ireland (PSNI) could owe back pay of around £30m.

The case was brought by Unison on behalf of the employees, Mr Agnew, and 3,700 additional colleagues, following the Employment Appeal Tribunal’s ruling in Bear Scotland v Fulton in 2014.

In that case, the Employment Appeal Tribunal found that regular overtime, which employees were obliged to perform if requested by the employer, should be included in holiday pay calculations. PSNI had not been paying employees in this way.

To protect employers from facing claims for back pay potentially going back to 1998, when the Working Time Regulations were introduced, the Bear Scotland judgment said that any such claims would not succeed where there had been a gap of three months or more between holiday underpayments.

However in NICA’s judgment it indicated that if the underpayments could be linked, then they could form a series, even if they were more than three months apart.

PSNI disagreed with this and lodged an appeal with the highest court in the UK.

If the Supreme Court agrees with NICA’s ruling, many employers across Great Britain and Northern Ireland could face claims for holiday underpayment.

The case follows the Supreme Court’s ruling on Harper Trust v Brazel from 2022 which found holiday pay for permanent staff who only work part of the year, such as term time workers, should be entitled to a full 5.6 weeks annual leave a year.

Although no decision has been made in this case, holiday pay is certainly a topic for employers to keep on their radar in 2023.