It is possible to bring a claim for unpaid holiday as an unlawful deductions from wages claim under the Employment Rights Act 1996 (Act). The Act permits claimants to claim for a "series of deductions". In other words, claimants can link a series of underpayments into one claim. The claim must be brought within three months of the last deduction in the series and up to two years' worth of underpayments can be recovered.
Before last year's Supreme Court judgment in the case of Chief Constable of the Police Service of Northern Ireland and anor v Agnew, previous case law held that if there was a gap of more than three months between deductions, the "series" would be broken (three-month rule). The three-month rule would prevent a claimant going further back in time in their claim, in order to recover earlier underpayments. The three-month rule was overturned by the Supreme Court in Agnew. The EAT has now followed Agnew in the case of British Airways plc v Mello and others.
In this case, the claimants were BA cabin crew. They were paid a basic salary, and received various allowances on top of this. The issue in the claim was whether those allowances should be included in holiday pay calculations. Importantly, the Tribunal heard the claim before the judgment in Agnew was handed down. The Tribunal found that a number of allowances (including meal allowances) should have been included in holiday pay calculations. However, it found that the 'series' had been broken by a gap of more than three months between payments of each distinct allowance. The Tribunal also found that BA had designated the first period of leave taken in each leave year as statutory leave.
BA appealed, arguing that meal allowances should not have been included in the holiday pay calculations. The claimants cross-appealed, including in respect of whether there was a 'series' of deductions, in light of Agnew.
The EAT has allowed both the appeal and the cross-appeal. All payments intrinsically linked to the performance of duties are to be included in statutory holiday pay calculations. Any payments to cover ancillary or occasional costs need not be included. The points to note are set out below.
This case is a useful demonstration of the impact of the Agnew decision on the removal of the three-month rule. It will now be for the Tribunal to determine whether the relevant allowances are sufficiently linked so as to form a series for holiday pay purposes, in the absence of the three-month rule.