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Important holiday pay case - Agnew

If you are an employer still looking for that Brexit benefit you may find it in the current review of the Working Time Regulations 1998, which were of course derived from an EU Directive.

One of the knottiest issues that has come from the Working Time Directive has been how to calculate holiday pay. What should be included in the calculation? How does it work with irregular working? What if that irregular working is only in term time in education establishments? What overtime needs to be considered?

The drafting of the Directive is not the clearest. The UK Regulations could be regarded in the same light, albeit that there is a calculation included in them. However, even that does not solve all the problems.

So, in the time-honored fashion, it has been left to case law to decide. That is how our system works – on the basis of interpretation where a piece of legislation cannot cover all of the possibilities that arise in daily life.

The problem is that you do not always get the cases you want, and cases can get settled before the desired clarity is reached at the Court of Appeal or the Supreme Court.

The history of cases addressing holiday pay is not straightforward and legislative amendments have also confused the picture. The latest case of Chief Constable of the Police Service of Northern Ireland & another v Agnew & others does give us some, but not complete, clarity on how far back employees can claim for underpayments relating to holiday pay.

Previously, the idea was that a claim could only be made for deductions within the previous three months unless there was a series of deductions, of which the latest was within three months before the claim was made. If there was a gap of three months or less in that series, it remained intact. Any longer and the chain was broken and the count back could go no further.

The Supreme Court in Agnew considered the point and decided that the three-month limit does not restrict the meaning of ‘series’ in the way that had previously been decided.

We are often used to hearing that all the relevant circumstances have to be considered, and this type of analysis is what the Supreme Court felt was relevant here. In doing so they relied on the EU principle of equivalence, holding that a gap of three months does not necessarily break the series. Other factors can come into play, such as the size and impact of the deductions.

So, does this mean that there will be a flood of cases looking at deductions going all the way back to 1998 when the Working Time Regulations came into force? Well, currently, in Great Britain, those regulations have been amended so that claimants can only look back two years. The crucial detail in Agnew is that this amendment does not apply in Northern Ireland, so the liabilities run into the tens of millions.

Now to sit back and wait for the next case to come along!

Contact our Employment Team if you have questions about this or any other employment law matter.

Please note that this update is not intended to be exhaustive or be a substitute for legal advice. The application of the law in this area will often depend upon the specific facts and you are advised to seek specific advice on any given scenario.