This case centred upon the calculation of holiday pay to police officers and civilians working for the PSNI.  Holiday pay was calculated based upon the basic salary of officers rather than taking their overtime into account.  The Chief Constable conceded that overtime should have been taken into account in accordance with the Working Time Regulations (Northern Ireland) 1998.  The Court of Appeal had to decide, inter alia, the following issues:

(a)  Whether a series of unlawful deductions allows for a claim back to November 1998 (when the Working Time Regulations were brought into effect) or a three-month limit should be imposed?

(b)  In calculating the daily rate for overtime, should it be divisible by 365 days, a fixed period of working days or the actual days worked?

In terms of the first issue, the IT found that there was a series of deductions in line with Article 55 of the Employment Rights (NI) Order 1996.  On appeal, whilst Stephens LJ disagreed with the reasoning in Bear Scotland Ltd v Fulton [2015] ICR 221 (which stated a three-month break between deductions broke a series) he referred to the judgment stating that when there is a series of deductions, there must be a sufficiently similarity of subject matter, such that each event is factually linked with the next (in the alleged series) in the same way as it is linked with its predecessor.

Accordingly, the central link was that holiday pay was calculated with sole reference to basic pay rather than the normal pay actually received. This was consistent from November 1998, thus allowing the unlawful deductions to be claimed from that date as part of a series.  Therefore, the appeal was refused on this point.

On the second issue, the IT had used the divisor of 365 days rather than the amount of days actually worked when calculating the overtime affecting holiday pay.  Stephens LJ referred to the CJEU case of Hein v Albert Holzkamm GmbH [2018] WLUK 184 when it was held that entitlement to paid annual leave must be calculated with reference to periods of actual work completed.

Furthermore, he conducted a mathematical analysis demonstrating how using 365 days rather than actual days worked can lead to a lesser sum being received.  The cross-appeal by the Respondents was allowed on this factual issue and the actual days worked should be used as the divisor rather than 365 days.

The case was remitted back to the IT for a final determination in terms of an award in individual cases.

Practical Lessons

This high-profile case provides a number of lessons for employers.  It is imperative that employers are aware that holiday pay calculations should be based upon normal pay rather than any basic salary or merely upon the number of contracted hours.

There should be a renewed focus on ensuring compliance with the Working Time Regulations considering the Court of Appeal has shown that a series of deductions can stretch back over decades meaning employers could face a huge bill (in the case of the PSNI, it could be upwards of £40 million).

The second issue is that the overtime should be divided over the actual days worked in line with the CJEUs decision in Hein.  Employers should be cognisant of the law regarding holiday pay and conduct reviews to ensure that their policies are compliant. 
https://judiciaryni.uk/sites/judiciary/files/decisions/Chief%20Constable%20of%20PSNI%20%26%20Northern%20Ireland%20Policing%20Board%20v%20Agnew.pdf 

Click here for commentary on  the original Industrial Tribunal Claim.