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The Northern Ireland Court of Appeal (NICA) has issued a wide-ranging judgment that challenges the 3 month break rule which has been used to limit holiday pay (and other unlawful deduction claims) since the Bear Scotland v Fulton decision in late 2014. It also brings into question the assumption that the 4 weeks’ Euro leave under the Working Time Directive should be used before any other leave in any holiday year.
The case, which relates to backdated claims for the underpayment of holiday pay in the Police Service of Northern Ireland going back 20 years, is a significant development and will have major implications for many employers in Northern Ireland dealing with historic holiday pay claims.
The key points from the judgment are:
1. That a gap of three or more months between deductions will not break the series of deductions. A claimant can therefore claim for unlawful deductions that occurred before the three month gap and form part of the series of deductions.
It is a question of fact whether a deduction forms part of a series and if all deductions arise out of the fact that holiday pay was paid as basic pay and did not include overtime/allowances, they are likely to form part of the same series.
2. A series of deductions will not be interrupted by a lawful payment.
There is no requirement for the first four weeks’ annual leave under the Working Time Directive to be taken before any other entitlement to leave (statutory or contractual). This leave is no different to any other leave and therefore there is no requirement for leave to be taken in a particular order.
3. The correct way to calculate holiday pay is to base it on working days not calendar days. So 20 days’ holiday (or 4 weeks’) should be calculated using the fraction 20/260 (or 4/52) or 7.69% and not 20/365.
4. The reference period used to calculate holiday pay is fact sensitive and an appropriate method for calculating and paying “normal pay” is to base it on averages taken over a rolling 12 month period immediately preceding the period of leave.
Given the financial implications of settling the claims is apparently around £40 million it is unsurprising that the case has been appealed to the Supreme Court. A decision of the Supreme Court would be a major development and could have major implications for employers throughout the UK.
(Chief Constable of the Police Service of Northern Ireland V Agnew and Others)
In a further Working Time case the Court of Appeal in GB has recently held that permanent workers on a part-year contract, such as term-time only, should not have their 5.6 weeks’ statutory holiday entitlement under the Working Time Regulations pro-rated to reflect the fact that they do not work for the full year.
The law requires a worker’s holiday pay to be calculated as a week’s pay for each week of leave and, if a worker does not have normal working hours, a week’s pay is taken to be the worker’s average weekly pay in the 12 weeks before the calculation date (which is the first day of the relevant period of leave excluding any weeks in which no remuneration was payable). This reference period is due to be increased to 52 weeks with effect from 6 April 2020.
The government has now updated its guidance for employers and employers who have been using 12.07% of earnings as a basis for the calculation of holiday pay for casual workers may want to carry out a review of this and obtain further advice.
(The Harpur Trust v Brazel)
This article has been produced for general information purposes and further advice should be sought from a professional advisor. Please contact our Employment Team at Cleaver Fulton Rankin for further advice or information.