Unlawful deductions
If a worker wishes to challenge their employer about potentially unlawful deductions from wages, they must bring a tribunal claim within three months of the underpayment.
Where there has been a series of underpayments, the worker may bring a tribunal claim within three months of the last of those underpayments.
Holiday pay
Underpayments for holiday pay entitlement are classed as an unlawful deduction from wages.
In Bear Scotland Limited v Fulton 2013, the Employment Appeal Tribunal (‘EAT’) severely restricted how far back a worker could claim for unpaid holiday pay. It said that a gap of three months or more between underpaid holidays would automatically ‘break the series of underpayments’ and those historic deductions, which may well have been unlawful, could not be claimed.
In Chief Constable of the Police Service of Northern Ireland and another v Agnew, the Supreme Court has upheld the Court of Appeal’s decision that police officers and civilian police support staff in Northern Ireland can recover holiday underpayments that stretch back as far as 1998.
What does this mean for employers?
This judgment has enormous implications for the police service of Northern Ireland as the total recoverable amount, backdated to 1998, could amount to up to £40 million. If the appeal had been successful, it would have been in the region of £300,000.
Northern Irish employers should audit their holiday pay and check that their holiday payments have been calculated correctly from 1998 onwards.
Employers in Great Britain are better placed as the Deduction from Wages (Limitation) Regulations 2014 impose a two-year limit on claims for unlawful deductions. However, employees can now bring claims where there are gaps of more than three months between periods of underpayment.
Reduce the risk of future claims by setting all the terms for holidays and holiday pay in a holiday policy.
The Government has said it plans to merge the four-week entitlement and the 1.6 weeks’ additional entitlement into one pot to reduce the complexity of calculating holiday pay.
Source: Chief Constable of the Police Service of Northern Ireland and another v Agnew
