Clarity at last on calculation of historic holiday pay claims

Today’s judgment from the Supreme Court restores certainty on the rules for recovering long-standing underpayments of holiday pay. It has confirmed that claimants can bring a claim based on a “series of deductions”, even though there has been a gap of more three months between successive underpayments.

The dispute involves police officers in Northern Ireland who had been consistently underpaid holiday pay over an extended period. Their employer sought to limit these claims in a number of ways. However, its most significant argument rested on a controversial ruling from the Employment Appeal Tribunal in 2015: Bear Scotland Ltd v Fulton. In that case the EAT decided that a series of deductions would always be broken if there was a gap of more than three months between successive deductions.

When the dispute reached the Northern Ireland Court of Appeal in 2019, it disagreed with EAT’s ruling and held that whether a particular deduction was part of a series was a question of fact for the tribunal hearing the claim. However, because its decisions are not binding in the rest of the UK, we have been waiting for the Supreme Court to confirm the position.

As widely expected, the Supreme Court has now upheld the Court of Appeal’s ruling and dismissed the employer’s appeal. It summarised the correct approach to determining whether a particular underpayment forms part of a series of deductions as follows:

“Whether a claim in respect of two or more deductions constitutes a claim in respect of a series of deductions is essentially a question of fact, and in answering that question all relevant circumstances must be taken into account, including, in relation to the deductions in issue: their similarities and differences; their frequency, size and impact; how they came to be made and applied; what links them together, and all other relevant circumstances.”

As far employment tribunals in Great Britain are concerned, this ruling broadly restores the law to how it was understood before Bear Scotland. However, in Great Britain (but not Northern Ireland) there is now a two year limit on how far back workers can claim for a series of deductions in respect of contractual wages, including holiday pay. This was introduced for claims in employment tribunals brought from 1 July 2015 onwards, though the regulations introducing this rule could be open to challenge on the basis that they did not comply with the UK’s obligations under EU law when they were introduced. 

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