Does a three-month gap in a series of holiday pay underpayments break the chain of unlawful deductions?

Claims for holiday underpayments are commonly brought under the unlawful deduction of wages provisions. Such claims can be brought within three months of the last in a ‘series’ of deductions, although the EAT has held that a gap of more than three months in the series of holiday underpayments will break the chain (this is known as the Bear Scotland decision). 

The NICA has recently considered the correctness of the Bear Scotland decision, in a large-scale group claim made for longstanding holiday pay underpayments by police officers and civilian police service staff in Northern Ireland. The claims relied on the claimant’s establishing that the underpaid holiday pay amounted to a ‘series’ of unlawful deductions. The Industrial Tribunal (the Northern Irish equivalent of our employment tribunal) upheld the claimants’ claims going back to November 1998. This decision was appealed and the NICA held:

• The EAT in Bear Scotland had been incorrect when it held that a three-month gap would break the chain of unlawful deductions. Identifying a series of deductions is a question of fact in each case, but the series of deductions is not necessarily broken by a gap of three months or more. Payments made between the various holiday underpayments would not interrupt the ‘series’ provided each holiday underpayment was factually linked to its predecessor by the same underlying cause (the incorrect calculation of holiday pay); and
• The EAT in Bear Scotland was incorrect when it held that workers automatically take the first four weeks’ of holiday provided for by the Working Time Directive (WTD) first. A worker’s annual leave entitlement, which can be granted from various sources (some statutory, some contractual), forms a ‘composite whole’. Each day’s annual leave includes, on a fractional basis, the various elements making up that composite whole.

The NICA also went on to give some guidance on the correct methods of calculating the daily rate of overtime and the correct reference periods for historical claims and future holiday pay entitlement. Strictly speaking, decisions of the NICA are not binding on the courts/tribunals in Great Britain, but given the seniority of the court, this decision will provide strongly persuasive in a future case challenging the Bear Scotland decision. If it were appealed to the Supreme Court, any subsequent decision would then be binding on the whole of the United Kingdom.

Chief Constable of Northern Ireland -v- Agnew [2019] NICA 32