Holiday Pay FAQ & Update - July 2019Posted in : 'Any Questions' Webinar Recordings on 4 July 2019
Given the importance of the recent NI Court of Appeal decision in Chief Constable of the PSNI & Northern Ireland Policing Board v Agnew & Others , this edition of Employment Law at 11 was a Holiday Pay Q&A special edition.
Seamus McGranaghan (Partner) answers your holiday pay questions in light of the recent decision, including:
- Will the logic in the PSNI v Agnew case be applied to all sectors of employment, public, private and third?
- Do employers have to pay average pay for all holidays or just the 20-day entitlement under the Directive or the 28-day entitlement under the Regulations?
- What period(s) should be used to determine average normal pay?
- What does ‘normal’ mean in relation to hours of work and holiday pay?
Poll 1: Do you have employees who regularly work extra hours over and above their contracted hours?
Poll 2: How much do you estimate the cost of back-pay for miscalculated holiday pay will be for your organization going back, for instance, to 1998? Is it less than £10,000? Is it more than £100,000?
Poll 3: Have you received notice from any employees or their representatives that they intend to make a claim for back-pay?
Background to PSNI Case
Scott: Could you explain why the PSNI and similar cases — because there have been a number of them including Patterson v Castlereagh here in Northern Ireland — how they've arisen in relation to the calculation of holiday pay?
Seamus: Yeah. Well, I mean, I think it's a good idea given that this has been a really newsworthy item that has been coming now for the past two weeks since we got the Court of Appeal decision. So it does no harm, I think, to look back and see where this all arose from.
Really, the commencement of that for me is that we're looking at the Bear Scotland Limited case back in 2014. As it says on the tin, this was a Scottish case that was dealt with by the Employment Tribunal in Scotland. Essentially, there was an issue that was raised during this case about entitlement for holiday pay.
Part of the case was really in and around employees that were saying, "Well, look, maybe I'm contracted to 30 hours a week, but I do regular overtime. I might be doing 40 hours a week. But when it comes to me getting my holiday pay, they only pay me for my contractual rate. They're not paying me for what I actually am working."
Scott: It's contractual hours. So they're getting paid 30, and they could be doing 40. They could be doing 50. You're mentioning overtime. It just means additional hours. There may or may not be some kind of additional payment for overtime. They may not get time-and-a-half or double-time. It's just any additional hours over your contracted hours.
Seamus: That's it.
Scott: Your normal pay is higher than you're contracted to be paid for.
Seamus: Yes, that's it. Essentially, then, the case was dealt with by the Employment Tribunal in Scotland, and it was appealed to their Employment Appeal Tribunal. Obviously, we don't have an Employment Tribunal or an Employment Appeal Tribunal in Northern Ireland, which is why we ended up at the Court of Appeal with our case, but the EAT decision in Scotland, essentially what it established was that all regular overtime payments should be included when calculating your statutory holiday pay. Within that, that's substantial as it is. It's a big pill for employers to swallow when there hasn't been a practice of doing that.
Then, also, what they went on to say was that there was limitations to that. Maybe it's just helpful to outline this, but there is a distinction between what the European directive dictated in respect to holidays that said your holiday entitlement was for 20 days and then whenever it was implemented in the U.K. here under our Working Time Regulations back in 1998. I know that they had been amended in 2016, but, in essence, the 1998 regulations are what we're looking at. It provides for 28 days holidays. Of course, we're allowed to include our statutory public holidays within those 28 days.
So a lot of people tend to work off the fact that they'll have four weeks holidays and then they'll get their stats on top of that as well, and that's for a full-time worker. That's the entitlement, 5.6 days per . . .
Scott: It's 5.6 weeks.
Seamus: I'm sorry. It's 5.6 weeks per year working at 28 days. That was the position that was set out. But in the Scottish case in Bear Scotland, they said that any entitlement to this regular payment of your holidays would only work for the Working Time directive, i.e. the 20 days. That was the first part of what they said. Then the second part that they said in relation to bringing these claims, they said that if there was a gap for a period of three months, that that would end the period for you to be able to bring a claim. So unless you were bringing your claim within three months of your . . .
Scott: Last holiday.
Seamus: . . . yes, of your last holiday, yes, that your claim would therefore be out of time. That's really how we've all been working from that case, and I know that there's a number of clients that have contacted me over the past two weeks saying, "What's all this holiday issue about? I only pay them what their contractual hours are. That's what they get paid on holidays."
I just tell them, "You should have actually been paying them for their regular hours worked, and that should be reflective of what they worked over those 20 days that they're entitled to."
Then we had the situation that arose in Northern Ireland. A case I think was brought around 2015, 2016 in Northern Ireland, and this involved around just over 3,000 claims that were brought on behalf of police officers and civilian employees in Northern Ireland. They had said that they had only received basic pay during their holidays, and it was estimated in around 2015, 2016 that, if this claim proceeded, the cost of it would be about £30,000,000.
So the case was heard in the Industrial Tribunal here, and the decision is available on the Tribunal's website. It was heard around late September or the start of October. It was actually only heard over four days, which is surprising. The decision was heard in September, and it was issued in early November. So we had a very quick turnaround to get this decision.
Essentially, what the decision said was that the holidays themselves, the setup, the principle, first of all, these were police officers and they were entitled to bring claims in respect to their holiday pay. They were saying or the decision essentially provides for the circumstances where you can . . . clearly, the position is that you're entitled to your holiday pay being reflective of what your normal pay is.
For normal pay, that should be what an employee is receiving and what their expectations are in respect to their paystub. When they take their holidays, that's what they're receiving in their pay pack.
Scott: So it's a bit like me. I'm a salaried worker. I get the same pay regardless of whether I'm on holiday or at work. There's no difference for me. These cases here are saying, well, these workers there, they do additional work. They get additional overtime. They're doing it often enough for it to be regular. We'll come to that in a minute, but they're doing it often enough. Therefore, they're getting less pay when they go on holiday then they would normally expect every month when they're actually at work.
Seamus: Yes, that's it.
Scott: I understand that not only is that unlawful, but they also say the three-month break that came up in Bear Scotland is wrong.
Seamus: So I want to get to that. Essentially, what the Tribunal said was that holiday pay should be based on pay including overtime and allowances and looking again at exactly what you're normally paid.
Then they went on further than that. They said that this idea of being able to say that there's a gap or a break of three months that would statute bar you from bringing a claim, they said that that was wrong, and essentially that if you are an existing employee and that you have been in default of your normal entitlements, when it comes to holiday pay, that you can bring that claim to the Tribunal and that you could do so with the potential of going back a lengthy period of time. There wasn't necessarily a gap of three months that would apply that would break the ability for the employee not to bring the claim. So that was the importance of the Tribunal decision.
The Tribunal decision then was appealed. It went to the Court of Appeal. Again, this has all moved very quickly the. The Court of Appeal heard the decision, and they issued their decision on 17th of June of this year. It is available online. It's a lengthy decision. You can look at some of the commentary that has come out since the decision if you don't want to read the whole thing, but it is a good read. For an employment nerd, it's good reading.
Essentially, the Court of Appeal have backed the initial Tribunal decision. They supported the decision, which was a brave decision on the basis of what Bear Scotland was saying, because it went so much further than that. They supported the Tribunal's case. What they've actually said is that these claims can go right back to whenever the legislation . . . the legislation was introduced back in 1998.
A Series of Deductions
Scott: So that's 21 years, and that's based on the fact that they're saying the series just have to be linked. The series in this is a series of unlawful deductions from wages, so every time somebody's paid, they haven't been paid the correct wage. Therefore, there has been money unlawfully taken out is the argument there. So there's a series of all those things, and because they're all connected, because it's all the same thing that's been happening all the time, then that establishes a series. There's no need to worry about whether there are three months between them or not.
If you look at the judgment again, they use examples of people who take their holidays at the beginning of the year, and, therefore, they would be excluded from having any rights because they don't take holidays until the beginning of the next year and suchlike in those three months. They go to visit people in Australia. Therefore, they lose all their entitlements just because they go to Australia. They say this is nonsense.
Seamus: Yeah, they say that's unfair. It's unfair to the employee to do that. There's a link there. There's a series, and that opens the net in relation to the ability to bring these claims and for the value of the claims. It's interesting that the £30 million that was anticipated after the Court of Appeal decision, that figure has increased up to £40 million. So it's a significant decision in terms of implementation here in Northern Ireland. It certainly is of interest, and I even see a lot of the commentary coming from England as well and possibly what's going to happen over there as well.
Scott: We've had some brilliant questions coming in, actually, but one of them was about, "Does this apply to the rest of the U.K.?" We'll come to that later, but it's certainly having a big impact there. If you have a look at the Weekly Review email if you subscribe, there's a very interesting article about whether the English legislation, which brought in a two-year limit to any back-pay claims on unlawful deductions, is actually lawful and whether that will be challenged. So yeah, it's having a big impact across the U.K.
The other questions are very interesting. We do have things that are related to them, but we're going to come to those whenever we can near the end.
So let's move on here. We've got lots of people who are listening. Like I say, 80% of them have people who regularly work overtime. Twenty-five percent of them have already had claims from employees or their representatives saying, "We want our back-pay." So it's a big issue, obviously.
What payments should be included in the Holiday Pay Calculation?
But apart from overtime, what other payments should now be included?
Because this has been established over a number of years. So what kind of things might be included as well as your average casual overtime?
Seamus: You're looking at actual hours worked as opposed to your basic working hours. That's the key for this. So for any employee, it's not about, "What are my basic hours here? I get a bit of overtime here and there." It should be reflective of the actual hours worked. If you are looking at regular payments that the employee is receiving, if there's commission built into your monthly salary, that becomes part of your pay. If you are doing additional hours, if you're doing overtime on a regular basis and if you're getting paid an enhancement for that overtime that you get regularly . . .
Scott: If you get responsibility allowance, generally that would be in there as well if it's part of your monthly salary. It's anything that's regular.
Seamus: It's really any additionality to your normal regular pay that you're receiving. If you're paid on a monthly basis and you look at your pay slip and there are a number of additional payments that you're getting and you get that on a monthly basis, it becomes your regular payment. It becomes part of your payment, and it therefore has an impact on your entitlement when it comes to holidays.
We talked briefly as well and we looked the aspect of bonus entitlements. Bonus entitlements are usually paid once a year or twice a year. Sometimes there's a summer bonus. Sometimes there's a Christmas bonus. Maybe there's just an end-of-year bonus. I don't see those sorts of payments as being regular payments, but if an employer was to . . . some of my clients have done this where they've said, "I can't afford to pay you a £5,000 bonus at the end of the year, but what I'll do is I'll take the £5,000 and I'll pay it on a monthly basis."
For me, although that might be seen as a bonus payment, they're getting it regularly every month, and, therefore, it becomes part of their normal pay. Therefore, whenever they take holidays, that should be reflected in the holidays also.
Scott: We have a problem here. I know there are still many questions coming in, very good questions too, but one of the issues here with the Court of Appeal is they've sent these cases back to the Tribunal to be dealt with on an individual basis.
I suppose an employee could put forward even on the annual bonus and say, "Hold on a second. I was told my salary would be X plus X-thousand with a bonus. Therefore, I do rely on that money, and I do expect that kind of thing."
But whether it's a disincentive to take holidays or not, which is what this is about at root here, the Working Time directive says if you don't get four weeks holidays a year, you get sick. Therefore, employers have to ensure their employees take them, and employees have to take them. Otherwise, they're going to get sick.
So that's the bit that's been protected, and we'll come to how you calculate those things in a minute. But in essence, all the examples are in that very lucid and well-written decision from the Court of Appeal relate to the 20 days from the Working Time directive that are in there.
Seamus: I suppose it's an interesting point that if you have over 3,000 claimants on this decision, when you get to the end of the decision, you see that it's referred back to the Tribunal to assess quantum and the calculations in terms of what is owed. I would imagine that there will be some sort of discussions that will go on between the parties and things like that, but 3,000 of these to work through it's certainly a job for a number of people to do.
Scott: And that's not included in the £40 million.
Appeal of the PSNI Decision
Scott: Just another question coming in there.
Will it be appealed?
Seamus: I think today is the date when the appeal has to be in, and from the rumours and the whispers that I have heard — and again, there are no guarantees in this and I am caveating this absolutely to say I have no certainty or guarantees on any of this— but my understanding is that there is an appeal drafted and that it is being appealed. I've heard that. I don't know that for definite.
Seamus: The other interesting aspect just about those calculations — of course, we've talked about it on our previous podcasts, and we've looked at some of the case law around it as well — is that one of the first signs here will probably be an employee saying to their employer, "I want all of my pay details. I didn't retain my pay slips. I want all my pay slips. If I fobbed in, I want details of all the hours that I've worked." They can go back and say, "I want those for 20 years."
If under GDPR you're retaining and holding all those records and information, that's where you're going to know how to calculate what exactly has been the normal pay and what they received as their holiday pay.
So I think a red flag . . . I know that 25% on that poll said, "Yes, we've had claims already. Our people have said this." But I would assume that you'll start to get a lot of subject access requests and things like that from people.
Scott: Funnily enough, one of the listeners there said, "We only keep pay records going back six years. What do we do?" Cry, I suppose. They may work out an average, or it may be that the employee has kept all their pay slips.
Seamus: Ultimately, I think it's something to bear in mind that if a claimant brings a claim, it's for the claimant to establish the claim. The responsibility is on the claimant to prove their claim, so they're going to have to get records from somewhere in order to substantiate what it is that they're claiming. Now, I know that there are various methods that they can do that. We're probably only going back digitally so far, and you're probably relying on paper records as part of that. Whether an employer has retained once HMRC guidelines have passed over in terms of those records is another matter. I don't know. But I would be saying from an employer stance, "It's your claim. You have to substantiate it."
Scott: Yeah, but it just shows you how difficult it's going to be.
Scott: It may be that what you end up doing is getting into those negotiations or contacting our good friends at the LRA and doing non-ET agreements taking away somebody's rights in return for a one-off consideration. That might be the way to go and may well happen in these cases here.
Seamus: It may do, but as if they're not busy enough.
Scott: They've got nothing else to do at the LRA. So there you go. They just need a few thousand more claims to settle.
Application of the case to all Employment Sectors
The next question here, I think we've covered it anyway. Will the logic of the PSNI v Agnew case be applied to all sectors, including employment at public, private, and third sectors?
Seamus: I think the basic answer to that is the legislation applies to everyone. It doesn't just apply to people in the public sector. Out of interest, some of the commentary I was reading said that the latest figures indicate that there's around 208,000 public sector employees in Northern Ireland. That's a substantial figure. But this will apply equally to anyone in private enterprise or business. The decision does not say anywhere that it relates solely to people that are employed by the public sector and civil service or anything like that. We can take it as read that it applies to all our workers and employees across the board.
Scott: So anyone who's doing additional hours in effect could potentially have a claim here if they can establish regularity and if they can establish that their pay is less than they normally get when they're not on holiday.
Seamus: It's interesting from the poll there as well. I know that we have a mix of listeners from public and private sector, but it's interesting that people are on the ball in terms of this already and making their claims to their employers. It's not a get out of jail card at all for anyone that's in the private sector.
Does the decision just apply to the 20 days provided by the Directive?
Scott: Do employers have to pay average pay for all holidays or just the 20-day entitlement under the directive or the 28-day entitlement under the regulations or indeed on additional contractual entitlement?
A lot of people don't just get the 28 days in total. If they're a five-day-a-week worker, they actually get more than that, and they could be into the thirties plus public.
Seamus: Absolutely. That's a tricky and a difficult question. I think that if you're going to take a very cautious approach and if you're going to try and resolve issues with employees and get them resolved and move forward, the 28 days is certainly the best way in order to proceed on that basis.
But if you are also trying to be savvy about it — and let's face it, everybody who's running a business probably can't afford to be making payments when they don't need to make them — there is an argument there, certainly, I think, that this would only apply to the 20 days in addition to those 8 days. The employer might be saying, "Listen. I'm going to average out your holidays over the year roughly." We talked about it being about two-thirds of that. "I'm going to pay you two-thirds of your . . ."
Scott: Average additional pay.
Seamus: Yeah. That's the liability there that you're paid.
Scott: It is a difficult one because, again, the calculations in the Court of Appeal judgment talk about it's made up of 20 days directive rights or 8 days at regulation rights and then 2 days for this additional service for police officers and whatever. So, in effect, you're looking at around two-thirds of your entitlement on an annual basis impacts for these 20 days.
I don't know where liability goes, because it's not actually answered in the judgment. If you were to pay it across the . . . it may be simpler for some employers to say, "We're just going to give you average pay every time you're on holiday," but I think there's an argument — and maybe this will form part of the appeal — that in order to work it out you pay two-thirds of your average increase. But that's a big calculation every time.
Seamus: It is, and I suppose the other aspect of it is the Court of Appeal talks about holidays not being indistinguishable in that sense. I suppose from a practical point of view, none of us look at our holidays and say, "Well, today, I'm going to take . . ."
Scott: My Working Time directive holiday.
Seamus: ". . . my Working Time directive holiday. Next week, I'm going to use one of my regulation days. Then after that, I'll use one of my enhanced contractual holidays that I have." We don't work on that basis, and I suppose that's what the Court of Appeal are trying to say is that they are indistinguishable. From that point of view, you sort of sway then towards the fact of is it easier just to look at it on a 28-day calculation. But there could be savings there for an employer to make if they did it on a two-thirds basis, absolutely.
Scott: It's difficult to work out things as well on periods. So if you're trying to work out average pay, in employment law we're used to going back 12 weeks. You're trying to work out average redundancy pay. In fact, there's a question in there about, "Can people who took voluntary service come back and look for claims?" We'll come back to that. I don't know if we'll have time, but will come back to that. It just shows you the complexity that comes in there, those questions about, "Should travelling time be included or travelling payments that they get when they don't travel and so on, whatever is a regular payment?
Reference period for calculating average pay
It's very complex here. But even when it comes to how do you establish when someone goes on holiday what period do you use to establish what their average pay is if it's going up and down above the norm. What does the Court of Appeal say on that? It's kind of difficult, isn't it?
Seamus: It is. Our standard position has always been we've always used 12 weeks as our period for calculations. In relation to that, the Tribunal essentially, they give a non-binding suggestion that a 12-month reference period was appropriate in cases. The Court of Appeal then came back, and what they said was that the reference period is, in fact, sensitive in each case, and they say that they would encourage parties to agree on a pragmatic and administration-friendly method for calculating and paying normal pay. That's sort of lifted directly from the quote as to what the Court of Appeal has said. So they're clearly saying that the 12-week period is unreliable for working out your normal pay. It may be that the 12 weeks, it works very well for some people and in some circumstances, and in others it doesn't.
If you have somebody that is saying, "Four times a year, we have a peak of overtime that we get or additional work that we have to do, and we're remunerated for it because four times a year we have returns to do to revenue, customs, or payroll or something along those lines," you're potentially going to capture it working with a 12-week period. Potentially, you're going to miss quite a chunk of it as well. It might be better in those circumstances to look at it overall in the round over a 12-month period rather than cutting it down and looking at it on a quarterly basis just in case you're missing parts of it.
It's not a great example, that, but the court says you have to take the circumstances as they present and ultimately come out with a fair decision on it. I think if you're trying to be savvy or smart about it and you're using a calculation because you're missing chunks of pay, that's going to be unfair.
Scott: Bear Scotland involved guys who were doing roads. They were doing the highways.
Seamus: They were construction workers.
Scott: Again, they would have peak times. You probably do much more overtime in the summer months than you would do in the winter months, and depending on when you do the calculation, that pays either through the roof or through the floor.
Seamus: It was an interesting point as well in terms of the fact that police officers now may get two weeks in the year that are coming up very soon where they're very busy.
Scott: They have to do overtime.
Seamus: There's overtime given. They might not get over time the rest of the year. We look at that period of overtime and say, "Is that normal pay? It's a 2-week period within a 52-week year. Is that normal pay?"
Scott: Does it even meet the definition is one of the things? It's a one-off payment or it's a one-off period, and it happens once a year. So does it really put you off taking your holidays?
Scott: Or is it just an extra thing that you get once in a while as a bonus?
Seamus: I suppose it's coming back down to looking as an employee and looking at your pay packet and saying, "What is my expectation for my weekly salary? What my expectation is for that is what should be reflected in my holiday pay when I get it."
Impact of absence from work on continuity for a series of deductions
Scott: I think we've maybe dealt with this, but maybe go into a little bit more detail. The PSNI holiday pay case seems to suggest that three months would not break the continuity for the purpose of showing a series of deductions from holiday pay. If someone was absent from work — for example, maternity leave or a lengthy period of absence — is it likely to impact on the series as there could be up to a year's absence? What's your view on that?
Seamus: Well, the interesting part is that if you look at the Tribunal's decision on the published website, all of the submissions are on there for both the claimants and the respondents, so you can really get your teeth into what the arguments were at the time.
I think that in the PSNI case, the Chief Constable and the policemen, they were relying on the Bear judgment argument. They were saying that if it was a gap of more than three months in a series of unlawful deductions from holiday that that would break the series. The Court of Appeal, they've accepted the Tribunal's version. They said that acceptance of Bear Scotland would lead to arbitrary and unfair results and outcomes for employees.
We talked about that, but just to break it down, the judgment itself, the Court held that where there was a series of deductions, there must be a sufficient similarity of subject matter is what they talked about. They said, for instance, each event being factually linked with the next in the series in the same way as it's linked with its predecessors, so just simply what we were talking about there. There's a series of events with these holidays. You can see it time and time again every time that you would look back on your timeline or on your pay slips.
I suppose what you would take out of that is really that the series is not broken by a gap of three months or more or that the identification of the factual link in an alleged series is what answers the question, I think, more about that rather than if you're looking at the breaks in the service itself.
Scott: It does make it kind of unfair. You don't say, "Well, okay, that woman went on maternity leave. Therefore, she's lost all her rights because she hasn't taken a holiday. She's accruing all the holidays, but she hasn't actually taken one, so there hasn't been a deduction." That one's been . . .
Seamus: Yeah, or someone . . .
Scott: . . . put aside.
Seamus: . . . that's off on sick leave for a period of time. We all know that you continue to accrue your holidays, but I think what the Court is saying is it's unfair to say that because they haven't taken holidays during that period — and for me those are protected periods anyway — that all of a sudden there's a gap there and you can't bring a claim.
Scott: Along similar lines, we've got a question about what if somebody's off and they're only getting SSP before they go on holiday. That would be another one where that wouldn't be the normal pay. I don't know that it would be right just to say, "Well, we're going to look at the last 12 weeks. Oh, you've been off for three months, so your normal pay is this." Ordinarily speaking, you'd have to look at a better period. I think that's what the Court is saying. Each case is on its merits.
Seamus: Yeah, and that's the tricky bit, and that's possibly where people are going to have to take advice. It'll be interesting to see what codes and practices might be put up by the Labour Relations Agency and things like that as well as to what advice might be to help employers get to the bottom line of what they have to do. It is that aspect where you're going to have to take it on a case-by-case basis.
Potential Impact of Brexit on Holiday Pay Claims
Scott: Okay. Moving slightly off here, what potential impact might Brexit have on holiday pay claims arising out of the PSNI decision?
Seamus: Well, my thought process on that always goes back to the fact that whenever Brexit was brought around, the clear stance of the government was that they weren't stopping anything that was happening in respect of directives. A good example there, I think, is the GDPR. It was brought in around the time of that, and the government said that would still be implemented and that once Brexit happened that it wouldn't fall off the table or it wouldn't be revoked.
If we've got the directive and it's become common practice under our regulations, I think that we'll probably continue with that. What may happen may be that there might be subsequent legislative changes or, more interestingly, there might be further court decisions that might change the landscape and change the position when it comes to holiday pay. It may be that post-Brexit the courts will take a different view.
If you read a lot of the court judgments, they don't just simply look at what happens within their own jurisdiction. They do look outside of that. You'll see cases that refer to decisions in the south in the Republic of Ireland and Australia.
Scott: And Canada and such like.
Seamus: So they don't just simply stick to what's going on in their own jurisdiction, and that probably means don't close your eyes to those things. So it's hard to tell what's going to happen after Brexit. I can understand somebody asking this question. I think it's a fair question to ask.
Scott: It comes down to whether the jurisdiction of the European Court of Justice still applies or the previous cases would apply here. What I think it would allow the Parliament to do is if you take that English restriction on back-pay going back two years, which, if you read the Weekly Review today, it's looking like it could be challenged, that would potentially be lawful post-Brexit because they're saying, "We no longer have to be bound by the ECJ anymore. We're instructing the courts not to look at those types of things. We're bringing in new laws." But it would take a while to construct all of that. In the meantime, presumably, the European stuff would still apply.
Seamus: I think that is correct. The other interesting aspect of that, just as we were talking about the Supreme Court and appeal to the Supreme Court in relation to this, is that there could be an appetite for them, obviously. You have to put it to them first, and they have to decide whether or not they're going to accept it. But given that there are conflicting positions now within two different jurisdictions, it might be that they are interested in taking this on and making a decision on it and giving some finality and settling the issues.
Scott: Or they might send it to the European Court, and that would be interesting, the questions to that particular one as well.
Backpay for Former Employees
On back-pay for former employees, we have a question. Somebody says, "We've been paying the correct payment as far as we're aware for the last two years." That's existing employees. There has been a break of well over three months since there's been any unlawful deduction there, but also, in the case of former employees that have left and have been away for more than three months, would that stop their entitlement at least through the Tribunal? We'll come back to several claims. That's another question there. But what about the Tribunal?
Seamus: I think it's probably helpful. I've had this question asked as well from clients and from a couple of HR advisors that I give some assistance to. Look, I think it's worthwhile pointing out that if you have been an employer who since Bear Scotland have said, "Okay, look, I'm going to provide my employees with their entitlement, that their holiday pay should reflect their ordinary pay," and you've been doing that for the past year or for longer than three months, that has broken the claim here for anybody to come at you. Anything prior to that I think is gone. Whether they're an existing or a former employee or whatever it is, they're not going to be able to bring a claim against you because the fact that you've been meeting it means that you've rectified the situation and that there's a sufficient break there in that. So that covers that situation where you have been.
Obviously, for anybody that thinks, "Oh, great, I'll start to do that now," remember you're putting a red flag up to them to say, "Well, look, I'm now going to pay you this." They might say . . .
Scott: They have three months or more to stake a claim.
Seamus: Yeah. Strictly speaking, three months is the time limit. We know that there can be some exceptions. We've talked about that in prior podcasts. But for any ex-employees that are left longer than three or six months, I don't think that they're going to be able to bring a claim against the company. I think they're statute barred in relation to that.
Scott: They can bring a claim, but they'd end up, hopefully, from the employer's point of view, being thrown out because they're out of time.
Seamus: And just to be clear, I'm talking about the Industrial Tribunal in that sense. I think the court position is slightly different because there's a longer period for claiming in the court system. That's a more interesting argument maybe to look at and one that I haven't given a huge amount of thought to.
But within the Tribunal system, certainly, I don't think that you need to worry about employees that left a year ago or longer that are going to come back and say, "Listen. You owe me 20 years back pay here for my holidays that you never paid."
You have to remember that although we have the Court of Appeal decision, it's not revoking the statutory period for bringing a claim for unlawful deduction of wages. It's three months. What there has to be is a causal sort of link, and there has to be this series. You can stop that by making the appropriate payments. Or alternatively, your risk is that if you don't do anything, you have the potential for this to go back to 1998 unless there's some sort of legislative change to it or there's an appeal that's successful.
Are Police Officers Workers?
Scott: There was another element in here just about police officers. I suppose to some extent you might argue it doesn't impact on so many of the listeners, but it does in a way. Is a police officer a worker within the meaning of the Employment Rights Northern Ireland Order of 1996, the ERO, which brought together those rights? Originally, in 1998, if I remember, the original wages order were incorporated into the 1996 order. This brought forward this concept of equivalence and effectiveness. Do you want to tell us a bit more about that?
Seamus: The starting point is always that you do at times get police officers coming in to see you about unfair dismissals and things like that. For anybody that isn't aware of it, if you look at the 1996 order, there are exclusions for certain types of people that cannot bring claims within the Industrial Tribunal. It doesn't apply to all claims. Police officers can't claim for unfair dismissal, but they can claim for discrimination in the Tribunal.
What the Court of Appeal had said was that police officers do not fall within the statutory definition of a worker contained within Article 33 of the Employment Rights Order of 1996, but they said that they were workers within the autonomous community law concept. That's how they put it. Then they went on to look at, "Does the EU principle of equivalence require them to be treated as entitled to a remedy under the ERO for unlawful deduction of wages?"
Essentially, they came back and said, "Yes, that does apply." It says that the police officers were entitled to pursue their claims under the Employment Rights Order just as they would if it was any other worker or employee. So they sort of stepped outside of this, and they looked at this aspect of autonomous community law concept to enable the claimants, the officers to be able to use the Employment Rights Order in order to assert their claims.
Scott: That, I suppose, cuts across quite a number of things. There was a case in December of last year. It was an Irish case that was sent to the European Court of the WRC and Garda Síochána. In effect, the European Court said that adjudication officers, which are the equivalent of our tribunals, are duty-bound to disapply any domestic legislation which doesn't adequately reflect the European requirements of the treaties and the directives.
Application of PSNI Case to rest of the UK
So there's any number of bits of legislation, including the Working Time regulations that we have both in GB and the Northern Ireland ones, that are subject, I think, to challenge and that may welcome looking at that equivalence argument. That may well be the thing that impacts on the GB regulations stopping the back-pay, because one of the other questions here is, "How does it impact in England or in GB?"
Seamus: It makes you think along the lines of our gig economy and those sorts of workers. We know that there's legislation there in relation to that, but you can see the Court widening the scope here, and it seems to be that that is the view across Europe in a lot of the decisions that we look at is that there's a widening of rights for individuals and for workers, whether or not they are casual workers or, in this case, that they would fall outside the realms normally of our legislation. But there's certainly a widening of it, and it's interesting how things are going to develop.
More from Seamus Says - Employment Law Discussion
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- Can we continue to pay a set fee for sleep-in shifts as a result of the recent Mencap case?
- What is an employer’s obligation to make reasonable adjustments when undisclosed by employee during initial application?
- Employee caught breaking lockdown rules on social media, can employer require a COVID test from them before returning to work?
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