As the holiday season looms again so too does the risk of employers facing expensive holiday pay claims.
In the case of Chief Constable of the Police Service v Agnew, the Northern Irish Court of Appeal has ruled that nearly 4,000 police employees can bring backdated holiday pay claims, some stretching back to 1998 when the Working Time Regulations were introduced. The cost of these claims for the police force is estimated to be £30 million.
In reaching its decision, the Court disagreed with the Employment Appeal Tribunal’s decision in Bear Scotland v Fulton which found that a gap of three months or more between underpayments of holiday pay would break the series of deductions, making any claims for underpayments prior to that period out of time.
This means that employers in Northern Ireland who have not paid employees properly (ie taking into account overtime and allowances in line with recent case law) for the four weeks’ holiday required under the European Working Time Directive, could face significant historic claims. The impact of this decision will be felt more acutely as Northern Ireland did not introduce legislation limiting backdated claims to two years as was the case in Great Britain.
Many believed it was only a matter of time before the Bear Scotland decision on gaps in a series of underpayments of holiday was challenged. Whilst the decision in Agnew is not binding on tribunals in Great Britain, it may well prove persuasive if the Employment Appeal Tribunal is ever asked to consider the issues again.
It is likely that the Agnew decision will be appealed to the Supreme Court; if the decision of the Court of Appeal were upheld, it would then be binding on all tribunals across Great Britain. However, for now, employers need to ensure that they are paying holiday pay correctly and, for those with staff in Northern Ireland, develop a strategy for mitigating the risk associated with backdated claims.