As reported in the BBC News this week, the Court of Appeal in Belfast has handed down a significant judgment, finding that workers are potentially owed money for a shortfall in holiday pay dating back 20 years from the date of commencement of the Working Time Regulations (Northern Ireland) 1998 (or from the commencement of their employment, if later), when (in this case) regular overtime worked has not been included in the calculation of holiday pay for police officers. The Police Service of Northern Ireland is now faced with a potential £40m tribunal award following this ruling.

Under statutory rules, claimants have 3 months from the underpayment of pay (including holiday pay), or from the last in a series of underpayments of pay to bring a tribunal claim to recover the underpayment. However, very significantly, the Belfast Court of Appeal has decided that a 'series of deductions' is not necessarily broken by a gap of three months or more between deductions/ underpayments. Whether there is a series of deductions/underpayments is a question of fact to be decided in each individual case. This ruling departs from the Employment Appeal Tribunal’s ruling that applies to workers in England and Wales, which held that any series of deductions is punctuated from the next succeeding series of deductions by a gap of more than three months.

The Deduction from Wages (Limitation) Regulations 2014, which places a 2-year limitation for claiming back payments of holiday pay, so would prevent a claim for back payment of holiday pay for such a long period of time, applies in England, Wales and Scotland, but not in Northern Ireland.

This ruling exposes employers in Northern Ireland to very significant claims for back payments of holiday pay potentially dating back 20 years, where holiday pay has not been correctly paid for that period of time.  This decision is not binding on Employment Tribunals/employers outside Northern Ireland.

In November 2014, in three co-joined cases, the Employment Appeal Tribunal in England held that compulsory, non-guaranteed overtime (i.e. where the employer is not obliged to offer overtime, but the worker must work it if offered) should be included when calculating holiday pay for a worker’s four week EU-derived statutory leave entitlement, but not for the additional 1.6 weeks of statutory leave provided for under UK law.

Where overtime is completely voluntary for both parties (i.e. where there is no obligation on the employer to offer it and no obligation on the worker to accept it), it should also be taken into account when calculating the four weeks’ statutory leave; when that overtime is “normally” i.e. regularly worked.

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