On 4 October 2023 the Supreme Court handed down its long-awaited judgment in the case of Chief Constable of Police Service of Northern Ireland v Agnew & Others, unanimously ruling that employees can claim for historic underpayments of holiday pay, even where there are gaps of more than three months between deductions.

Background of the Case

The claimants in the proceedings were a group of 3,380 police constables and 364 civilian employees who worked for the Police Service of Northern Ireland (“PSNI”). The employees claimed that they had been underpaid in respect of payments for holiday pay on the basis that this had been calculated in reference to their basic pay, despite regularly working overtime. Whilst it was agreed by the parties that the workers had been underpaid, the period for which the claimants were entitled to back pay was disputed.

The provisions of the Employment Rights (Northern Ireland) Order 1996 (‘ERO’), which mirror that of the Employment Rights Act 1996, afford workers the right not to have unauthorised deductions made from their ‘wages’, the definition of which also includes holiday pay. The employees sought to rely on the provision within the ERO which would allow them to claim for underpayments arising from a series of payments which had been made, provided that the last underpayment in the series had not been more than three months before the claim was brought in the Tribunal (“the Series Extension”).

The PSNI contended that the police officers could not claim for underpayments in accordance with the ERO on the basis that, under this legislation, they were not considered to be employees or workers. They therefore relied on the Working Time Regulations (Northern Ireland) Order 1996 (“WTR”) which would restrict the period for which the officer could recover underpayments for to three months before the claim was brought in the Tribunal.

The Judgment

Previously, the Employment Appeal Tribunal (“EAT”) case of Bear Scotland had established that a series of deductions could only be linked in circumstances where there was a period of three months or less between each deduction. The Supreme Court disagreed with this however and upheld the previous conclusion of the Court of Appeal in Northern Ireland (“COA”) that a series of deductions is not necessarily broken by a gap of three or more months.

It also agreed with the COA there is no requirement for there to be a contiguous sequence of deductions, but that there must be sufficient similarity in the subject matter of each of the deductions in order to establish a series. In this case, the deductions were linked by way of the calculation of holiday pay in reference to the employees’ basic pay.

In addition to this, the Supreme Court agreed that the series of deductions was not broken by a lawful payment of holiday pay on the basis that the payment made had been calculated by reference to basic pay rather than normal pay.

In the circumstances, the Supreme Court further ruled that the police officers were also able to benefit from the Series Extension in accordance with the EU principle of equivalence.

As such, the PSNI’s appeal was unanimously dismissed.

Impact of the Decision

Following the Supreme Court ruling, the PSNI is now liable for payments of millions of pounds in back pay to its employees spanning back a number of years. It is important to note, however, that the impact of this judgment is mitigated for employers in the rest of the UK by legislation which now imposes a two-year backstop for claims in respect of unlawful deductions.

With that being said, there is no doubt that the effect of this judgment will render employers at an increased risk of costly claims for holiday pay now that a gap of three months, or indeed making a lawful payment, does not necessarily prevent a series of deductions from being established.