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Regulations set 2 year cap on holiday pay claims

Background

In November 2014 the decision in the Bear Scotland case held that holiday pay should include payments in respect of non-guaranteed but compulsory overtime and some other payments. Our report on this decision and our recommendations can be found here.  

The general rule is that as long as an employee submits a claim for unauthorised deductions of wages within three months of the last deduction, they can also claim for other backdated deductions that form part of the series. (See below for an example of what “a series of deductions” means).  

Before the Bear Scotland decision it was not entirely clear what might form a series of deductions as it applied to holiday pay underpayments and employers feared claims stretching back years. To employer’s relief the Bear Scotland ruling prevented claims with more than a three month gap between each under payment. That severely limited the scope of employees to make substantial backdated claims for underpaid holiday pay but did not rule it out completely. To assist employers, and provide certainty for employees, the Government have now introduced regulation which will limit backdated holiday pay claims to two years.

Impact

This regulation only applies to claims presented on or after 1 July 2015. This could encourage employees to present a rush of claims before this date.

Action Points

The Lock -v- British Gas case is being heard at the Employment Tribunal this February.  Following the opinion of the Advocate General of the CJEU and the Bear Scotland case, it is likely that this new hearing will rule that sales commission should also be calculated into holiday pay.  Employers should consult with their legal advisers on what measures they should take now to protect their business.

An example of what a series of deductions means 

Let’s say an employee who is paid monthly is underpaid for hours worked in August, October, December, January and February. He is paid the correct amount in September. Providing he submits an employment tribunal claim within three months of latest February underpayment, he can also claim for the underpayments from his January, December, November and October wages. He cannot claim for the August underpayment because he was correctly paid in September and this broke the series of deductions. 
 
If you would like any further information or help with these urgent issues, email our employment law solicitor deborah.scales@cartwrightking.co.uk.

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