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Holiday pay and unlawful deductions: the series extension

Posted on 30 October 2023

This article first appeared in the November 2023 issue of PLC Magazine.

In Chief Constable of the Police Service of Northern Ireland and another v Agnew and others, the Supreme Court held that a series of unlawful deductions from wages is not necessarily broken by a period of more than three months between them ([2023] UKSC 33). The decision overrules the Employment Appeal Tribunal’s (EAT) judgment in Bear Scotland Ltd and others v Fulton and others, which had held otherwise (UKEATS/0047/13; see News brief “Calculating holiday pay: overtime is overdue”, www.practicallaw.com/6- 589-4746).


The claimants work for the Police Service of Northern Ireland (PSNI), most of them as police officers but some as civilian staff. They brought claims before the industrial tribunal in Northern Ireland (the tribunal) to recover sums for underpaid holiday pay stretching back to November 1998. These underpayments arose because the claimants had received holiday pay calculated by reference to their basic pay, whereas UK and EU case law has since clarified that workers should receive their normal pay when taking their four weeks’ holiday under the Working Time Directive (2003/88/EC) (the Directive) (Williams v British Airways plc C-155/10; Lock v British Gas Trading Ltd C-539/12, www.practicallaw. com/7-572-0086, see feature article “Statutory holiday pay: time off or time for employers to worry?”, www.practicallaw. com/4-570-7411; and Bear Scotland).

In Agnew, normal pay should have included an element for overtime, as many of the claimants supplemented their pay by working compulsory overtime. There were occasions on which the claimants were paid their correct holiday pay for their Directivederived holiday. However, this was because they did not work any overtime during the relevant period, as opposed to the PSNI adopting the correct method for calculating holiday pay.

There was no dispute that the claimants had been underpaid for holiday pay. The question was what period of historic underpayments they could claim for.

The series extension

Under the Working Time Regulations (Northern Ireland) 2016 (SI 2016/49 (NI)) and its predecessor, the Working Time Regulations (Northern Ireland) 1998 (SI 1998/386 (NI)) (together, the WTR (NI)), workers may bring a claim before the tribunal for underpaid holiday pay provided that they do so within three months of the underpayment.

Similarly, under the Employment Rights (Northern Ireland) Order 1996 (SI 1996/1919 (NI)) (the Order), workers may bring a claim before the tribunal for unlawful deduction from wages provided that they do so within three months of the deduction. It was common ground that the underpayment of holiday pay constituted an unlawful deduction from wages. However, where there has been a series of unlawful deductions,
a claim is in time provided that it is issued within three months of the last deduction of that series (the series extension). There is no equivalent to the series extension in the WTR (NI).

It was undisputed that the WTR (NI) applied to both the civilian staff and the police officers, the latter by virtue of provisions in the WTR (NI) that expressly extended its rights to police constables (for these purposes, a police officer is a type of police constable). However, there were no equivalent provisions in the Order relating to police constables. It was argued, therefore, that the police officers could not rely on the series extension in the Order and could only claim for underpayment of holiday pay for the three months before issuing their claims, in accordance with the WTR (NI).

By contrast, it was accepted that the civilian staff could rely on the series extension. However, it was argued on behalf of the PSNI that, for the purposes of the series extension, a series is broken by a period of more than three months between deductions, following Bear Scotland concerning the materially identical provisions in the Employment Rights Act 1996 (ERA). Accordingly, so it was argued, the claims of the civilian staff could only extend back until the time at which the series was broken by such a period.

Bear Scotland reversed

The tribunal held that the claimants could claim for the underpayments going back to November 1998 and the Northern Ireland Court of Appeal (NICA) affirmed this ([2019] NICA 32). The PSNI appealed to the Supreme Court, which unanimously dismissed the appeal.

Firstly, it held that the series extension should be available to the police officers under the WTR (NI). The EU principle of equivalence requires that a right under EU law is not subject to less favourable conditions than a corresponding right under domestic law. The court agreed with the NICA regarding the similarities between the objectives, purposes and essential characteristics of the Order and WTR (NI), which rendered them comparable. It was also clear that claims under the Order are more favourable to claimants than those under the WTR (NI), given the availability of the series extension under the Order only. The court therefore concluded that the inability of the police officers to benefit from the series extension infringed the EU principle of equivalence and should be remedied by incorporating into the WTR (NI) the wording proposed by the NICA.

Secondly, the court agreed with the NICA that whether unlawful deductions amount to a series is a question of fact to be determined by all the relevant circumstances. It also agreed that:

  • A contiguous sequence is not a requirement of a series.
  • A series is not necessarily broken by a period of more than three months between deductions or by a correct payment that, as in Agnew, comes about because of the continued application of the common fault that is responsible for the incorrect payments.

In so holding, the court overruled Bear Scotland that a series is necessarily broken by a period of more than three months between deductions. The court considered that this interpretation of the Order would undermine its purpose to protect workers and derives no support from its express language, thereby agreeing with the provisional view of the Court of Appeal in Smith v Pimlico Plumbers Ltd ([2022] EWCA Civ 70; see News brief “Holiday pay: Sash Windows is pushed wide open”, www.practicallaw.com/w-034-5145).


Although Agnew was concerned with the Northern Irish legislation in the WTR (NI) and the Order, its ramifications extend to Great Britain on account of the materially identical provisions of the Working Time Regulations 1998 (SI 1998/1833) and the ERA respectively.

The most striking feature of Agnew is the explicit reversal of Bear Scotland and the fact that employers can no longer rely on a series of deductions being broken by a period of more than three months between them. As a result, there are no longer any bright lines as to what constitutes a series. Rather, employers will have to make a more qualitative assessment on a case-by-case basis. It is possible that the court’s reasoning will also be relevant to other sections of the ERA and the Order, such as whether a worker has been subjected to a series of similar acts or failures on the grounds of making a protected disclosure.

Understandably, employers may now be concerned about significant historic liabilities. The PNSI in Agnew, for instance, was liable to the claimants for approximately £30 million in compensation. That sum would have been around £300,000 had it succeeded in its appeal. This may be of greater concern for employers in Northern Ireland than Great Britain, at least in relation to claims for unlawful deduction from wages. The Deduction from Wages (Limitation) Regulations 2014 (SI 2014/3322) ensure that such claims under the ERA cannot extend back for more than two years, but there is no equivalent limit under the Order.

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