The weather and holidays - our hairdresser conversations of choice! But a holiday obsession is not the exclusive domain of hair salons; employment lawyers and HR teams spend a lot of time talking about them too. And now we have another decision to talk about. The Supreme Court's decision in Chief Constable of the Police Service of Northern Ireland v Agnew (found here).

Case highlight

A claim can still be bought for a series of unlawful deductions of wages even when there is more than a three-month gap between each deduction in the series.

Legal principle

Under s23(3) Employment Rights Act 1996, employees can bring a claim for unlawful deduction of wages where they have been underpaid by their employer. This underpayment will often be (as it was in this case) a failure to pay the correct holiday. The claim can be for one underpayment (provided it is bought within three months) or it can be for a series of underpayments, provided the last in the series was within three months of the claim being bought. Claims for unpaid holiday can also be bought under Reg 30 of the Working Time Regulations 1998. Reg 30 does not, however, provide for compensation for a series of underpayments.

What is a series of deductions? 

The EAT ruled in the case of Bear Scotland v Fulton in 2015 that this series would be broken if there were more than three months between one of the deductions in the series.

Working example

• Underpayment 1 - Feb 2023; underpayment 2 - April 2023, underpayment 3 - May 2023; underpayment 4 - September 2023
• An employee can only bring a claim for underpayment 4 (provided bought before Dec 2023) because there are more than three months between underpayment 1,2, 3 and 4

What has this new case said?

The Supreme Court in the Agnew case has ruled that a three-month gap does not break a series of deductions. If the deductions are linked by a common fault i.e., they are failure to pay holiday pay, then a three-month or more gap does not break that series. So, our employee above could bring claims for underpayments 1,2,3 and 4 provided they are linked in some way.

The good news...

For employers in England and Wales, in 2014 the Deduction from Wages (Limitation) Regulations came into force. It introduced a two-year limitation period for unlawful deduction of wages. So, historic claims which before would have been disregarded because of the three-month rule, are still subject to that two-year limit. This is not the case in Northern Ireland so the claimants in the Agnew case who worked for NI Police Force may have claims going back decades.

Take away points

• If you have outstanding unlawful deduction of wages claims you may need to re-address liability considering this case. Whilst it is an NI case, the Supreme Court ruling affects all UK decisions – this will apply to cases employees may have bought in connection with the Harpur case where holiday pay was being calculated at 12.07%;
• Ensure that holiday pay is being calculated accurately; the issue in this case was that holiday pay was calculated as basic pay only. Does your holiday pay include regular allowances, overtime (guaranteed) and commission? Do you still use the 12.07% method to calculate holiday for those working irregular hours? Whilst the limitation period is only two years – failure to calculate holiday pay correctly can still be a costly claim if it affects hundreds of employees during that time.