Agnew judgment ‘provides a path to justice for umbrella contractors’ docked holiday pay

A holiday pay ruling which seemingly put the “cat among the pigeons” is actually quite ‘fact-specific;’ has ‘mitigated impact’ beyond Northern Ireland employers, and 'doesn’t fundamentally alter case law'.

Nonetheless, these reflections by experts on the UK Supreme Court case, Chief Constable of Police Service of Northern Ireland (PSNI) v Agnew & Others, are unlikely to detract from the important message umbrella contractors will take from it.

Namely; as umbrella company employees, contractors are permitted to launch claims of historic holiday pay underpayments even if gaps of more than three months occur between the deductions, JMW Solicitors has interpreted of the ruling.

'Series'

More than that, though, from an employer perspective, the payment of a lawful holiday pay payment does not necessarily stop the unlawful deductions from forming a ‘series,’ according to JMW’s Paul Chamberlain.

In the case, the PSNI went before the Supreme Court with this dual-defence -- a correct holiday pay payment (i.e. based on normal pay, so basic pay + overtime), as well as a three-month gap, to say it limited how far back it owed holiday pay to 3,380 police constables and 364 civilian employees.  

And significantly, the constables and civilian employees said the sums should have been paid to them as far back as November 1998.

But according to its ruling released this month, the Supreme Court rejected the PSNI’s dual defence, and dismissed its appeal.

'Path to justice'

As a result, “judgments such as Agnew provide a path to justice for umbrella workers who are being exploited by umbrella companies,” according to Martyn Valentine of The Law Place.

Valentine further told ContractorUK he was referring to a “common abuse” by umbrella companies – brollies calculating holiday pay on the basis of basic pay at the National Minimum Wage; omitting the ‘commission’ element, then keeping the balance themselves.

Going before the Supreme Court, the constables alleged similar; that PSNI underpaid them because it based their holiday pay on just basic pay, even though they regularly worked overtime.

'Prevailing view'

Problematically for the court, the relevant legislation is silent on the rate for holiday pay, as it refers only to “normal pay,” even though the “prevailing view” is that it comprises basic pay plus overtime, says Chartergates.

On Saturday in an emailed update, the law firm added: “The PSNI… disputed how far back the [constables] could go with their claim arguing that the relevant statutory provision, within the Working Time Regulations NI, which is EU-derived legislation, meant that claims could only be brought for underpayments made three months prior to the claim being instigated.

“Conversely, the [constables] pointed to domestic legislation, which allowed claims to be brought for unlawful deductions from wages for a potentially longer period of time, and argued the legal principle of equivalence should be applied.

“Specifically, [the] domestic legislation [in Northern Ireland] provided for claims to be brought for a ‘series’ of deductions, provided that the last deduction, in the series occurred within three months of the claim being lodged.”

'Cat among the pigeons'

In its own similar analysis, JMW Solicitors points out that the Employment Appeal Tribunal -- which first heard Agnew -- sided with the PSNI, by stipulating that a ‘series’ of deductions could only be linked in circumstances where there was a period of three months or less between each deduction.

But the Supreme Court now ruling that a ‘series’ isn’t necessarily broken by a three-month (or longer) interval is why the case, on first sight at least, “put the cat among the pigeons,” the firm’s Mr Chamberlain posted to LinkedIn, seemingly because it goes against the EAT’s decision.

He wrote in the firm’s analysis, published subsequently: “It is important to note, however, that the impact of [the Agnew] judgment is mitigated for employers in the rest of the UK, by legislation which now imposes a two-year backstop for claims in respect of unlawful deductions.”

'Agnew judgment doesn't fundamentally change existing law'

Valentine agrees that the implications might be less than first thought.

“Agnew doesn’t fundamentally change existing law applying to England and Wales,” the founder of The Law Place began in a statement to ContractorUK.

“Judgments such as Flowers V East of England Ambulance Service NHS Trust established that holiday pay must include regular overtime and other payments in addition to basic pay. [By contrast] the [Agnew] judgment mainly concerns the Northern Ireland version of the Working Time Regulations and much of the arguments are fact-specific to the appellants.”

Valentine confirmed that umbrella company contractors in the UK are entitled to holiday pay being calculated on the basis of their normal pay, including regular overtime, as held in Harpur Trust V Brazel.

'Doubts over whether legislation would stand up'

Reflecting on the Agnew judgment, handed down on October 4th 2023 by what’s regarded as the final court of appeal, Chartergates said: “[So a] gap of three months, between underpayments of holiday pay, would not automatically break the chain of a series of deductions, and neither would any payments that were correctly made.

“It is important to note, that in Great Britain, the Deduction from Wages (Limitation) Regulations 2014 imposes a two-year limit for individuals to bring an unlawful deductions’ claim to an employment tribunal after 1st July 2015. This was not introduced in Northern Ireland, but in light of this judgment there are now doubts as to whether this legislation would stand up, if challenged.”