UK employers could face increased liability for historical holiday pay claims after the Supreme Court ruled that, in unlawful deductions from wages claims, a 3-month gap in a "series of deductions" won't necessarily break the series (although the 2-year backstop still applies). Chief Constable of the Police Service of Northern Ireland and another v Agnew and others  UKSC
Holiday Pay Overhaul: Supreme Court extends liability for UK holiday pay claims
This is the first in a two-part series of holiday pay articles. Please click here to view Holiday Pay Overhaul (Part 2): 5 key changes for employers in Great Britain.
What should you do now?
The decision extends liability for potential historical holiday pay claims because employees and workers can now bring unlawful deductions from wages claims where there are gaps of 3 months or more between periods of underpayments
Employers should review holiday pay rates across the business. Employers who pay all holiday at the higher rate of 'normal' pay are not at risk of claims from this case, but employers who only pay basic pay for all holiday types are risking claims for underpaid holiday. Unlawful deductions from wages claims for underpaid holiday still have to be brought within 3 months of the last deduction, so taking action now to adjust the rate of pay will minimise any potential exposure by starting that clock ticking.
Even employers who pay EU holiday as 'normal' pay will need to assess whether there is any potential historical liability for underpaid holiday. This is because workers may argue that any UK holiday and additional contractual leave ought also to have been paid at the higher rate, because "insofar as it is not practicable to distinguish between different types of leave" then it is now part of a composite whole, and employers can no longer use a lawful payment or the 3-month rule to break any "series" of deductions. Although the Supreme Court does not address how to distinguish between different types of leave and the order in which it is taken, it should be sufficient to explain this in contracts or policies. In any event, any claims are still limited by the 2-year backstop in Great Britain, although claims in Northern Ireland will be able to stretch back further.
For help or advice in reviewing your arrangements, please get in touch.
To the Point
Subscribe for legal insights, industry updates, events and webinars to your inboxSign up now
Get up to date with our latest news on LinkedInFollow now