The recent Agnew case deals with a technical but practically very important point: if a worker is underpaid by their employer when they take annual leave, how far back in time can the worker go when claiming the money they are owed? The case thus has important implications for workers’ ability to get an effective remedy when their rights have been infringed.
The claimants in Agnew worked for the Police Service of Northern Ireland (PSNI). Although they regularly worked compulsory overtime, they were only paid their basic pay when they took annual leave. The Court of Justice of the European Union has held in a series of important decisions (e.g. Williams, Lock) that a worker is entitled to receive their ‘normal pay’ when they exercise the right to take paid annual leave. As a result, the PSNI accepted that it had failed to pay the claimants enough holiday pay.
However, the PSNI argued that the claimants could only seek money owed to them in the three months prior to the bringing of their claims. This is because an employment tribunal claim must usually be brought within three months of the matter to which it relates; otherwise it is time-barred (Working Time Regulations (Northern Ireland) 2016, regulation 43(2)). However, the claimants argued that they could go back much further because the Employment Rights (Northern Ireland) Order 1996 (ERO), Article 55 – which provides an alternative route to bringing a claim for unpaid holiday pay as an ‘unlawful deduction’ from wages – makes provision to bring a claim in respect of a ‘series’ of unlawful deductions, provided that the claim is brought within three months of the last deduction in the series.
Having resolved some preliminary issues not noted here, the Supreme Court turned to the correct interpretation of the ‘series’ provision. In the Bear Scotland case in 2014, the EAT had held that a series of deductions could be broken by a gap of more than three months between deductions. The reasoning was that, if the claimant failed to issue proceedings within the three-month time limit, they were out of time and could not get back within the limitation period just because a subsequent deduction of a similar kind was made by the employer. However, the Supreme Court held that this was mistaken: the whole point of the series provision was to allow for deductions to be claimed over a longer period of time than three months, so there was no automatic break in a series just because there was a gap of more than three months between deductions.
Importantly, the Supreme Court began its discussion of the issue by adopting a purposive approach to the legislation, following its own reasoning in Uber. The judges identified the purpose of the legislation as being ‘to give workers a measure of protection from exploitation and… to protect vulnerable workers from being paid too little for the work that they do’ . From this perspective, the decision in Bear Scotland was clearly unfair on multiple grounds. An employer could exploit the rule to its own advantage by leaving a gap in deductions to break the series. Even if this did not occur, there were many situations in which longer gaps might arise, for example, where the worker did not take holiday or sick leave for a period of time. Additionally, it would not be realistic to expect vulnerable workers to bring multiple tribunal claims in order to preserve their rights. Instead, the correct approach was to apply the word ‘series’ in its ordinary meaning, taking into account all the circumstances. In particular, it was relevant to consider whether the same ‘fault’ linked the various deductions into a series. Applying this to Agnew itself, all the deductions stemmed from the same ‘fault’: that of failing to take into account overtime when calculating the claimants’ holiday pay entitlement.
The Supreme Court’s decision in Agnew reflects the importance of the right to paid annual leave by ensuring that breaches are properly remedied. Of course, the financial consequences for PSNI (a public service already in financial difficulties) are huge, but it is worth bearing in mind that this was money that the affected workers should have received when they took their annual leave. A strong justification is required for restricting workers’ ability to recover money they are rightfully owed.
That leads to a final point: a comparison with the law in England, Wales and Scotland. The ‘series’ provision also exists in these jurisdictions, but subject to a two-year ‘back stop’ under section 23(4A) of the Employment Rights Act 1996. This means that, even applying the Supreme Court’s approach, working people in these jurisdictions will only be able to recover monies owed going back two years from the date of the claim. This provision, which was introduced with the express purpose of limiting employers’ liability, is hard to justify from a worker-protective perspective. The tension between this provision and the ruling in Agnew indicates the pressing need to harmonise approaches, so that workers can claim all the money they should have been paid in the first place.