SC ruling on series of deductions
Thursday 19th October 2023
The Supreme Court in Chief Constable of the Police Service of Northern Ireland & anor v Agnew & ors, has held that police officers can bring claims for unpaid holiday on the basis that the underpayments were part of a series of deductions, despite not being workers or employees for the purposes of the Employment Rights (Northern Ireland) Order 1996. Additionally, and significantly, the SC held that a relevant series of unlawful deductions is not necessarily broken by a gap of more than three months.
Thousands of police officers and hundreds of civilian employees brought claims under the Northern Irish legislation for underpaid holiday, arguing overtime should have been included. The Chief Constable argued that the police officers had to rely on the WTR Regulations 2016, which limits claims to the sums underpaid in the three months before an ET claim is brought. The ERO allows claims where an underpayment forms a series, provided the last payment was not more than three months before the claim was brought. However, police officers are not workers or employees for the purposes of the ERO 1996.
Applying the EU principle of equivalence, the SC agreed with the Northern Ireland Court of Appeal, in holding that police officers are entitled to claim under the ERO 1996.
The SC then considered how the word “series” should be interpreted and whether a series of unlawful deductions comes to an end where two payments from which unlawful deductions were made, are separated by more than three months, or separated by a lawful payment made between them.
As the word “series” is not defined in the legislation, the SC viewed its meaning to be a question of fact, considering all relevant circumstances of the deductions. This includes their similarities and differences, their frequency, size, impact, how they came to be made and applied and what links them together.
The SC held that the unlawful deductions made were all linked by the common fault or failure of incorrectly calculating holiday pay and the series was not broken by an interval of more than three months. Where a lawful payment was made, it was because the worker concerned was not paid overtime on that occasion and therefore was not underpaid. Any lawful payments were calculated in the same was as unlawful payments, by reference to basic pay only, and therefore the SC held they did not break the series.
The SC also clarified that there is no requirement that leave derived from different sources must be taken in a particular order. No distinction is to be made between the 4 weeks leave mandated by EU law and the additional 1.6 weeks provided for under domestic law. All leave forms part of “a single, composite pot”. The SC also confirmed that what constitutes normal remuneration is a question of fact as is the reference period used to calculate it and when calculating the daily rate of pay it is not appropriate to use the number of calendar days in the year.
This decision has significant implications for employers. However, in Great Britain, the Deduction from Wages (Limitation) Regulations 2014 imposes a two-year limit of unlawful deductions claims brought after 1 July 2015. With no such limit in Northern Ireland, it will cost their Police Service millions to remedy the failure to properly calculate holiday pay.
All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.