UK Supreme Court delivers long-awaited Judgment in the case of Chief Constable of Police Service of Northern Ireland v Agnew.
The much-anticipated decision of the UK Supreme Court (Supreme Court) has now been handed down and has dismissed the appeal by the Police Service of Northern Ireland against the previous decision of the Northern Ireland Court of Appeal.
The effect of the Supreme Court’s decision (which is now binding across the United Kingdom) confirms that employees can claim for historic underpayments of holiday pay even if there are gaps of more than three months between deductions.
The potential cost implications on employers are vast. To put the decision into context, the Police Service of Northern Ireland has estimated that the cost of their historic holiday pay clams will now increase to £30million from £300,000 as a result of this decision.
It should be noted that, as it currently stands, there remains a two-year limit on historic holiday pay claims under the Deduction from Wages (Limitation) Regulations 2013. However, employers should be mindful of the decision in Smith v Pimlico Plumbers Ltd, shared in February 2022, in which the Court of Appeal found that the employee was entitled to recover compensation for non-payment of holidays for the full six-year period of his employment and did not impose the “backstop” of two years in respect of his claim.
In view of the likelihood of further challenge to the two-year backstop, it remains to be seen whether the backstop will continue to mitigate the risks of extensive liability for employers facing unlawful deduction from wages claims in respect of incorrectly calculated holiday pay.