In the recent case of Deksne v Ambitions Ltd, the Employment Appeal Tribunal (EAT) overturned the Tribunal’s decision that the Respondent’s incorrect payment of the Claimant’s holiday pay was not an unlawful deduction from wages on the basis that the deductions did not amount to a “series” and were therefore out of time.
The EAT held that whether deductions of wages constitute a series is essentially a question of fact, answered by taking account of all relevant circumstances including the similarities, differences, frequency, size and impact of the deductions, as well as how they came to be made and applied and what linked them together. Ultimately, the EAT held that it is immaterial that the interval between the payments was, from time to time, in excess of three months or that there was one correct and lawful payment.
Background
The Claimant, who worked part-time since 2017, argued that her holiday pay had been underpaid as part of a series of unlawful deductions, starting from August 2020 and even in August 2019. When considering the appeal, the EAT noted that holiday pay rules changed in April 2020, meaning that holiday pay for workers with variable hours should be calculated over a 52 week average.
The Respondent admitted that it had calculated the amount of holiday pay owed to the Claimant incorrectly because it had included three weeks when the Claimant did not work. However, in the first instance, the Tribunal ruled that a break of three months stopped deductions from being considered part of a series.
Chief Constable of the Police Service of Northern Ireland v Agnew
Last year, in Chief Constable of the Police Service of Northern Ireland v Agnew, the Supreme Court held that a gap of three months between underpayments of holiday pay does not automatically break the chain of a series of deductions, and neither does a correct payment. This created at significant shift in legal interpretation.
Decision in Deksne
In light of this, in Deksne, the EAT ruled that the deductions from the Claimant’s holiday pay did meet the threshold for forming a series, since they stemmed from the original incorrect calculation. This was due to the Supreme Court’s updated decision in Agnew, which removed the previous decision that a gap of three months would automatically break the chain of a series of deductions.
The EAT upheld the Claimant’s appeal and held that the Tribunal’s decision was erroneous. Given the Tribunal’s factual findings, and considering the Supreme Court’s decision in Agnew, the EAT substituted a finding of unlawful deductions from wages and ordered the employer to pay two years’ worth of underpayments to the Claimant. The employer was unable to rely on any gaps longer than three months to stop a “series” of deductions from being formed.
Issues with holiday pay, in particular the issue of underpayments relating to incorrectly calculated holiday pay, continue to be a concern for many employers. Further, the new Employment Rights Bill has introduced a plan for the creation of a new single enforcement body, the Fair Work Agency,
which could have the power to enforce holiday pay on behalf of workers. This has made correcting any errors and dealing with any historic holiday pay liability an even more pressing for employers.
If you are an employer who is concerned about their compliance with complex annual leave rules, please get in touch with a member of our Employment team.
