Specialist Lawyers Welcome Clarity But Say Firms Will Shoulder Higher Costs

UK businesses face the threat of significant compensation claims for holiday pay miscalculations following a Supreme Court ruling today (5 October), warn specialist employment lawyers at Irwin Mitchell.

In the case of Chief Constable of The Police Service of Northern Ireland and another v Agnew and others, the Court has delivered its verdict on the crucial issues surrounding unlawful deductions and underpayments of holiday pay.

Expert Opinion

"Today’s ruling is of major significance and has the potential to cost UK businesses millions of pounds.

“Many businesses will be concerned. Although the decision offers clarity on an issue that many organisations have been concerned about, employers won’t be able to use technical arguments to limit their liability for underpaid holiday pay claims. That said, the situation is slightly different in England, Wales and Scotland because the government introduced legislation to limit how far back individuals can bring unlawful deduction from wages claims, to two years. Northern Ireland didn’t do this. But, even with these restrictions, some employers will still have to pay their staff a substantial amount to settle their cases.”
Jo Moseley, an expert from Irwin Mitchell's employment team

Today’s ruling means that the PSNI will have to pay approximately £40 million in holiday pay to its officers. This case involves the Police Service of Northern Ireland (PSNI). In 2018, an industrial tribunal determined that unlawful deductions were made from the holiday pay of nearly 3,750 PSNI officers and civilian staff over a period of 20 years. This legal battle stemmed from a significant ruling (Bear Scotland v Fulton) in 2014 by the UK Employment Appeal Tribunal, which stated that employees who regularly worked overtime should receive extra holiday pay.

The 2018 PSNI tribunal ruled that holiday pay for staff was calculated based on their basic working hours, rather than considering actual hours worked, including overtime. In the same 2014 case, it was also established that workers in England, Scotland, and Wales had a limited timeframe to make a claim for underpaid holiday pay. The Court of Appeal in Northern Ireland disagreed with these time restrictions, deeming them arbitrary and unfair.

The Court of Appeal's decision was challenged by then-Chief Constable George Hamilton and the Policing Board. However, in 2019, the Court of Appeal upheld the tribunal's ruling, leading the PSNI to escalate the case to the Supreme Court. Today's ruling mandates that the PSNI must pay approximately £40 million in holiday pay to its officers.