Supreme Court: Appeal against £30m PSNI holiday pay ruling rejected

About this case:

• Citation:
  [2023] UKSC 33
• Judgment:
  External link
• Court:
  UK Supreme Court

Delivering the judgment, Lord Kitchin and Lady Rose held that the Court of Appeal had correctly determined that the holiday pay had been incorrectly calculated, such that it did not account for overtime. Further, the court rejected the appellants’ claim that these payments should be confined to a three-month limitation period.

Background

The respondents to the appeal work for the PSNI as police officers and civilian staff. They brought claims before the Industrial Tribunal to recover sums they should have been paid since November 1998 as part of their annual leave holiday pay.

They were not paid these sums because it was thought to be sufficient to pay them an amount equivalent to their basic pay. It later became clear that they should have been paid their “normal” pay when they were on holiday, not just their basic pay. That normal pay should have included an element for overtime because many of the respondents regularly worked compulsory overtime.

The appellants, the employers of the respondents, accepted they had been underpaid. The issue was how far back the respondents were entitled to recover their underpayment. The appellants attempted to rely on a statutory provision limiting such claims to the three months before the claim was brought. That would have meant that most of the money claimed by the respondents would have been time barred.

The respondents instead relied on a statutory provision which would allow them to claim underpayments which arose from a series of payments, provided that the last underpayment in the series was not more than three months before the claim was brought. The appellants accepted that civilian staff could rely on this provision, but disputed that the police officers could.

Equivalence under employment rights legislation

The respondents included 3,380 police officers and 364 civilian employees, who were owed in full approximately £30 million. If the claims were limited to the three-month window, the amount owed would have been reduced to about £300,000.

Regulation 20 of the Working Time Regulations (Northern Ireland) 2016 (2016/49) concerns pay for annual leave:

Under article 45 of the Employment Rights (Northern Ireland) Order 1996 (1996/1919) a worker has a right to not have unauthorised deductions made from their wages. Unlike the WTR (NI), there is no article in the ERO providing that police officers are to be regarded as “workers”.

As a result, the appellants argued that the police officers could not rely on the ‘series’ avenue provided for under article 55(3) of the ERO.

Deciding this point, the Court of Appeal concluded that the objective, purpose and essential characteristics of the ERO and WTR (NI) were similar, and the purpose and essential characteristics of both procedures are almost identical.

Adopting this approach, the court applied the principle of equivalence, to find that a worker under the WTR (NI) was not precluded from relying on comparator procedures in the ERO to enforce their rights.

Using this approach, the court was also not required to address the issue as to whether the police officer respondents were also workers within the scope of the ERO.

The court rejected claims that this approach could impact legal certainty, and instead upheld the Court of Appeal’s conclusion that the inability of claimants under the WTR (NI) to benefit from the ‘series’ extension available under ERO infringed the EU principle of equivalence and should be remedied by incorporating wording into the WTR (NI).

Meaning of the term ‘series’

The Court of Appeal held that “a series is not necessarily broken by a gap of three months or more between the deductions; nor is a series broken by a lawful payment if that lawful payment comes about by virtue of the common fault or unifying or central vice that underpins the series”.

This interpretation was challenged on appeal, with the appellants arguing that a ‘series’ must have a factual and temporal link, which must limit time periods for payments. This series, they claimed, must be ended by a gap of more than three months, or by making one lawful payment.

The Supreme Court found that a strict three-month time limit for making a complaint would impose a wholly unreasonable burden on a worker if the acts formed a series. Such payments or deductions often take place more than three months apart, and this approach, “would also impose a wholly unnecessary burden on the employee for whom each individual deduction is relatively small, but where the aggregate is substantial”.

The court accepted that, in certain cases, a delay beyond three months could extinguish the jurisdiction, stating, “The limitation period is short and deliberately so. The purpose of protecting potentially vulnerable workers is not uncontrolled.”

In general, a claim must be made within three months, but the court rejected that one could simply assume that a gap of more than three months would extinguish a claimant’s ability to recover. Such an approach would largely ignore the exception to the general rule which the ‘series’ extension provides, as well as the protection it is intended to confer.

Specifically, the court was satisfied that the Court of Appeal made no error in finding that each unlawful deduction was factually linked by the common fault that holiday pay was calculated by reference to basic pay rather than normal pay.

Conclusion

For these reasons, the court upheld the determination made by the Court of Appeal, and the appeal was dismissed.