Back-dated holiday pay claims in Northern Ireland – more changes to come?
Holiday pay claims brought as unlawful deduction of wages claims under the Employment Rights Act 1996 (ERA) must be brought within 3 months of (1) the unlawful deduction, or (2) the last in a series of deductions. Where there has been a series of deductions, provided that there is no more than 3 months between each instance, employees can claim for up to 2 years of back-dated holiday pay. This, for the moment, remains the legal position in England and Wales.
The position relating to the ability to bring claims for a series of unlawful deductions, provided that there is not a gap of more than 3 months between each instance, came from the case of Bear Scotland v Fulton (EAT, 2014). The rationale being that each claim of unlawful deductions would, in its own right, need to be brought within 3 months, so a gap of over 3 months between each deduction in a series of deductions would "break the chain". This case was quickly followed by a rather hastily passed piece of legislation, the Deduction from Wages (Limitation) Regulations 2014/3322, which limited the time period for which claims could be back-dated to two years.
However, in the recent case of Chief Constable of Northern Ireland Police v Agnew (17 June 2019), the Northern Ireland Court of Appeal (NICA) questioned the rationale behind the decision made in Bear Scotland that a gap of more than 3 months would break a series of deductions. In this case, NICA held that: "There is nothing in the Employment Rights (Northern Ireland) Order 1996 (ERO) which expressly imposes a limit on the gaps between particular deductions making up a series. We do not consider that there is anything implied from the terms of the ERO which compels to such an interpretation of a series. As a matter of the proper construction of the ERO we conclude that a series is not broken by a gap of three months or more".
The relevant wording of the ERO addressed by the NICA and which was found not to impose a limit on the gaps between deductions is exactly the same as the wording in the ERA.
Whilst this case was decided by the NICA (and accordingly, is not binding on English and Welsh Tribunals) it will nonetheless provide potentially powerful ammunition for any claimants who seek to argue that a gap of more than 3 months should not break a series of deductions in England and Wales. This will not only apply to cases involving back-dated holiday pay, but any unlawful deduction of wages claims, with "wages" covering any fees, bonuses, commission payments, sick pay, statutory family leave related pay and guarantee payments. Whilst we are currently not proposing that employers should change existing practices that are in line with Bear Scotland case law, it is important to appreciate that the law in this area is still under consideration. We will keep you updated as and when there are further developments.