Underpaid Holiday Pay – Could Claims Soon Start from 1998?

The implications of a recent case surrounding holiday pay in Northern Ireland could extend to the rest of the UK, in the event of a successful appeal.
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The implications of a recent case surrounding holiday pay in Northern Ireland could extend to the rest of the UK, in the event of a successful appeal.

What This Case Means for You

Although not binding outside of Northern Ireland, if the decision below is appealed, a Supreme Court decision would be binding across the UK.

In the meantime, it also increases the likelihood of appeals against any decisions of the Employment Tribunal (ET) which apply the “3-month rule”.

For the time being, employers face a period of increased uncertainty, though those in England and Wales can find comfort in the backstop which limits claims for unpaid wages on or after 1 July 2015 to a maximum of two years back pay.

The “3-month” Rule

The Employment Rights (Northern Ireland) Order 1996 (ERO) provides that claims for underpaid wages, including underpaid holiday pay, must be brought within 3 months of the last underpayment. The “3-month rule” was established by an Employment Appeal Tribunal (EAT) judgment in the case of Bear Scotland Ltd v Fulton (Bear Scotland) and provides that, where there is a gap of more than 3 months between any series of underpayments, it will break the series, which significantly limited the scope for back pay claims.

The Case in Depth

Over 3000 police officers brought claims in the Northern Ireland Industrial Tribunal (IT) for underpaid holiday pay. They claimed that the Police Service of Northern Ireland (PSNI) had looked at their basic salary only, rather than including overtime and various allowances in their calculations, arguing that they were entitled to back pay dating back to 1998, when the relevant legislation was introduced.

The IT upheld their claims and, in reaching this conclusion, it considered the EAT’s judgment in Bear Scotland. The IT was not obliged to follow the EAT judgment and it declined to do so.

PSNI appealed to the NICA on a range of issues, including whether the 3-month rule was correct.

Northern Ireland Court of Appeal

The NICA dismissed the appeal and, since the NICA decided that a series of deductions would not be broken by the “3-month rule”, the claimants were able to claim for arrears of holiday pay as far back as 20 years.

For more information, please contact Kathy Halliday in our Employment Law team on 0121 227 3711 or at khalliday@vwv.co.uk.

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