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Don’t be caught out by new rules on backdated Holiday Pay

In a groundbreaking Supreme Court ruling on 4th October 2023, businesses across the United Kingdom have been presented with a significant legal challenge in the form of backdated holiday pay claims. The judgment in the case of Chief Constable of Northern Ireland v Agnew and others, has far-reaching implications in all four UK nations, impacting how businesses calculate and manage holiday pay for their employees.

This blog will delve into the details of this important judgment, exploring its background and legal implications for businesses. We will also guide you on how Ralli Solicitors LLP can provide the support your business needs to navigate these intricate legal waters effectively.

  

Background to the ruling and impact on UK nations

The ruling, stemming from a case involving Northern Irish police officers who sought compensation for historical underpayments of holiday pay, has brought to the forefront the complexities of the Working Time Regulations (WTR) and the potential liabilities employers may face – particularly large corporates.

In Northern Ireland, the decision is particularly far-reaching as employees can now claim all the way back to the implementation of the WTR 25 years ago. Within the jurisdiction of England and Wales, the position is tempered somewhat by an additional statutory two-year backstop on claims (which does not apply to Northern Ireland). Thus, had the police action been in England and Wales, employee claims would have been limited to underpayments in the two years ending on the date of the last incorrect payment.

While Scotland follows a separate legal system, it’s essential for Scottish businesses to understand that this ruling could potentially influence the way similar cases are approached and decided in the future. Therefore, Scottish businesses should seek advice from a firm registered in Scotland.

 

Legal implications for employers

In light of this ruling, businesses must be proactive in ensuring their compliance with the WTR. Failure to do so may result in potential claims from employees for historic underpayments. Since claims of this kind are often pursued by multiple claimants as part of a group action, a large employer’s financial liability could be substantial, depending on the extent of the non-compliance.

In order to mitigate the risk of a claim, careful, discreet steps may be taken to review how holiday pay is calculated to ensure that it complies with the WTR. Employers are advised to seek specialist advice on this point from a qualified employment lawyer, thereby ensuring that the review is protected by professional legal privilege. In the event that mistakes in calculations are uncovered, the employer should correct the calculation in respect of all holiday pay going forward. There would be no need to publicise this fact unless an employee made specific queries.

It is crucial to bear in mind that the relatively short time limits for commencing claims in the Employment Tribunal means that once any payment errors have been corrected, many potential claims for historic underpayments may soon become time-barred. In other words, where the employee fails to take action by serving an ACAS Early Conciliation Certificate (ECC) notice within three months of the date of the last unlawful deduction complained of, the claim may not proceed.

Where an employee identifies underpayments but manages to take action within three months of the date of the last deduction complained about, unfortunately, there is little the employer can do other than pay up.

 

How Ralli Solicitors LLP can help

Understanding the background of the ruling, its legal implications, and potential risks is crucial for employers and HR professionals. By seeking expert legal advice and taking proactive steps to ensure compliance with the WTR, businesses can protect themselves from costly claims.

Ralli Solicitors LLP specialises in helping businesses understand their legal obligations and minimise risks associated with employment-related claims. If your business is facing potential litigation claims from employees due to backdated holiday pay, we are here to assist you. Our team of experienced employment law experts headed up by our Employment Law Partner, Mark Higgins, can provide you with the guidance and support you need to navigate these legal challenges effectively.

 

In this ever-changing legal landscape, it’s crucial to have a trusted legal partner by your side. Contact our Employment Law department on 0161 832 6131 in Manchester or 0207 535 0750 in London, to learn how we can assist you in addressing these legal implications and safeguarding your financial stability.