Britain’s Supreme Court has ruled against the Police Service of Northern Ireland (PSNI) in a long-running case on the calculation of holiday pay.

The case, brought by a group of PSNI employees, could have implications for Irish companies with employees in Britain.

The PSNI was appealing a 2019 finding by the Northern Ireland Court of Appeal that upheld a previous finding by a tribunal in favour of the employees, who had argued that they were entitled to claim for underpayments of holiday pay dating as far back as 1998.

The PSNI had paid staff based on ‘basic pay’, whereas they should have received payments based on ‘normal pay’, which included overtime for police officers.

‘Series’ of underpayments

The case centred on whether the PSNI staff were entitled to claim as part of a ‘series’ of underpayments, provided that the last underpayment was not made more than three months prior to their claim being lodged.

The PSNI had argued that, under employment rules in the North, staff could claim only for sums linked to the previous three-month period.

It also argued that police officers had not been defined as ‘workers’ by the Employment Rights (Northern Ireland) Order 1996, on which the claimants had been relying.

Later EU-driven employment legislation, however, had extended the definition of ‘worker’ to police officers.

Equivalence

The Supreme Court decided that an inability to bring claims under the 1996 regulations would infringe the EU principle of equivalence – under which national procedural rules applicable to EU rights must not be less favourable than those governing similar domestic actions.

It said that the Court of Appeal was right to find that each unlawful underpayment was linked by “the common fault that holiday pay had been calculated by reference to basic pay only”.

It added that a series did not require a contiguous sequence of deductions, and that a gap of more than three months between deductions did not necessarily bring a series to an end.

The judges further found that a correct payment of holiday pay did not break a series, if that correct payment was calculated by reference to basic pay.

'Legal milestone'

The chair of the Police Federation of Northern Ireland Liam Kelly described the ruling as “the most significant legal milestone in what was a seven-year campaign”, adding that it would have been “more prudent” for the PSNI to have accepted the original finding, or the Court of Appeal ruling.

Lawyers at A&L Goodbody said that the Supreme Court decision was binding across the UK, which would largely align the position on holiday pay calculation and payment.

In a note, however, they added that the ruling would have “huge financial consequences” for employers in the North, which does not have a statutory two-year ‘back-stop’ that operates in the rest of the UK.