Holiday Pay – everything you need to know!
Partner and Head of the MTB Employment Department, John McShane, has recently succeeded in an unlawful deduction of wages claim in respect of holiday pay for Police Officers and Civilian PSNI staff. The decision from the Court of Appeal will have far reaching implications for employers and employees if the employee does regular overtime and is not paid their ‘normal pay’ when they take annual leave, ie to include overtime. Having acted for the majority of the lead Claimants in this case our Employment Department has specialist knowledge and experience in how this ruling will impact upon current serving members of the PSNI and all other employees whether in the public or private sector. Below is a summary of the Court of Appeal decision together with a list of frequently asked questions to assist employers and employees knowing where they stand now. The Court of Appeal did determine that each case will turn on its own facts. It is therefore important that you seek legal advice to see how this Judgment will effect your personal circumstances. Should you require advice, whether you are an employer or an employee, please contact either John McShane or Judy Hamilton on 02890329801.
SUMMARY OF DECISION
The NI Court of Appeal rejected the Appeal by the Chief Constable that Police Offices were not entitled to receive their “normal pay”, ie to include overtime payments, in their holiday pay calculation. Claims had been brought by 3380 police officers and 364 civilian employees to the Employment Tribunal, claiming that there had been unlawful deductions from their pay under Articles 45 and 55 of the Employment Rights (Northern Ireland) Order 1996 and, in the alternative, that there had been underpayments of holiday pay under Regulation 30 of the Working Time Regulations (NI) 1998 and Regulation 43 of the Working Time Regulations (NI) 2016. The Tribunal found in favour of the police officers and civilian claimants. The Chief Constable and Policing Board then appealed this decision. There was also a cross appeal by the Police Officers.
In summary, the Court of Appeal had to determine the following:-
- The meaning of “Worker” in the Employment Rights (Northern Ireland) Order 1996 (ERO);
- The application of the EU principle of Equivalence;
- The meaning of a “series of deductions”;
- Is annual leave entitlement to be taken in a particular sequence?;
- The method of calculation of the amount of overtime to be taken into account in holiday pay; and
- The identification of the appropriate reference period.
The Court of Appeal determined the following in each of the above issues:-
- Police Officers are not “workers” within the meaning of Article 3(3) of the ERO.
- If not “workers” under the ERO, the question to be answered was whether the principal of equivalence requires that they must be treated as being entitled to the remedy provided by Article 50 of the ERO or whether it requires that the remedy provided by the Working Time Regulations be applied. The Court of Appeal held that the correct comparator, with an EU law claim, was a Tribunal Claim under the ERO. They went on to say that the domestic remedy under the ERO is more advantageous than the Community law remedy under the Working Time Regulations (WTR). In doing this, the Court of Appeal exercised its power to amend the reading of the WTR to allow a claim for a series of deductions.
- A series of deductions is a question of fact but, importantly, it was decided that a series is not ended by a gap of more than 3 months between unlawful deductions nor is it ended by a lawful payment. Whether there has been a series of deductions will differ in each individual case.
- It was decided that annual leave from different sources, ie the 20 days under the Working Time Regulations and the “additional annual leave” of 8 days and any other contractual entitlement, can be taken at any time and is essentially part of the one pot.
- The argument was whether the devisor should be 365 calendar days or 260 working days. The Tribunal had determined this to be 365 days and this was appealed by the Police Officers. The Court of Appeal determined that it was not 365 days and that it should calculated by their actual working days, ie for a normal 5 day week this would be 260 days.
- The reference period was determined to be fact sensitive in each case.
FREQUENTLY ASKED QUESTIONS
Q What is Holiday Pay?
A Holiday pay is the pay you receive when you take your holidays.
- The Working Time Directive states you are entitled to 20 days holiday paid at “normal pay”.
- You are entitled to a further 8 days under the Working Time Regulations.
- Normal can include overtime payments and allowances.
Q How often do I need to work overtime or be paid allowances to receive holiday pay?
A The Courts have not defined ‘regularity’. Each case will, therefore, be considered on its own ”facts”. The Court stated that “we agree that a series of deductions can be constituted by deductions with a sufficient frequency of repetition but occurring at different time intervals and also we would add in different amounts”.
Q Am I entitled to holiday pay?
A You may be entitled to holiday pay if you work ‘regular’ overtime and/or receive allowances but when you go on holiday your employer does not pay you your “normal” pay, ie including any overtime worked for the 20 days under the Working Time Directive:
e.g If you earn a basic wage of £100 and earn £50 from overtime and / or allowances your total earnings will be £150. If you are then only paid £100 when on holiday you can bring a claim for the loss suffered. Any claim must be brought in the preceding 3 months, ie within 3 months from the date that you should have received normal pay for the holiday taken.
Q Which allowances are included?
A This will depend on the facts of each case.
Q If allowances or overtime have been paid when I go on holiday do I have a claim?
A This will depend on the facts of each case and also will depend on whether your employer has been paying “normal pay” on the basis of working days or calendar days.
Q How do I claim for Holiday Pay?
A You can only bring a claim if you have suffered a loss within the last 3 months regardless of whether or not you have been doing overtime in the past. You must lodge a claim immediately as employers may start making lawful payments which could break the “series” if a claim is not made within 3 months. Furthermore, emergency legislation could be brought in to limit the extent of the claims as it was in England and Wales.
Q My friend retired – can they claim back pay?
A That depends on when they retired. If they have retired more than 3 months ago then they will not be eligible to bring a claim to the OITFET.
Q How is this calculated?
A This will be question of fact. The Court held that the divisor of 365 days was wrong and that the divisor used should be the actual days worked.
If you have a claim as an employee, or if you are an employer and require advice on the implications of this Judgment on your business, please get in touch with our Employment Department on 02890329801.