Further Developments on Holiday Pay

Gillian Melville
22nd Dec 2014

Since our last update on holiday pay, there have been further significant developments arising from the Employment Appeal Tribunal’s ruling that non-guaranteed overtime requires to be included in the calculation of employees’ holiday pay.


Firstly, the union acting for the claimants in the highly-publicised EAT case of Bear Scotland and others v Fulton and others announced that it would not appeal the ruling that where underpayments of holiday pay were more than three months apart, that gap in time broke the ‘series’ of unauthorised deductions from wages and made it impossible to claim any further back in time. This means that for the time being, we can expect Employment Tribunals to follow this ruling in other cases, although the ruling may be vulnerable to being overturned if another case considering this point is appealed to the Court of Appeal or Court of Session.


Next, the Presidents of the Employment Tribunals in Scotland and England and Wales issued new practice directions to the effect that claimants who have already presented holiday pay claims can apply to amend their claims, to cover underpayments of holiday pay for periods after the original claims were presented. This makes it substantially easier and cheaper for employees to bring further claims if employers continue to pay ‘European’ holidays at basic pay only, particularly as it may not now be necessary for claimants to pay a fee for each new claim they present.


Finally, and perhaps most significantly, the government yesterday laid before Parliament new Regulations limiting to two years in most cases the period that claims for unauthorised deductions from wages can go back in time. At the same time, the new Regulations close the door on the alternative of presenting holiday pay claims as breach of contract claims, by specifying that the right to paid holidays under the Working Time Regulations does not confer any contractual rights on employees.


These Regulations will come into force on 1 July 2015.  From that date, it would now appear to be close to impossible to bring claims for backdated holiday pay for any period in excess of two years. One likely consequence of this is that there will be a rush to submit claims for underpaid holiday pay before the Regulations come into force.


These developments are likely to push more employers towards starting to pay holiday pay based on average earnings sooner rather than later. However, it is unlikely that we have yet come anywhere close to hearing the last word on these controversial issues.


Finally, it is important to note that the new Regulations imposing the two year limit on unauthorised deductions claims will not just apply in relation to holiday pay claims. Most other claims relating to underpayment and non-payment of wages will be similarly limited, subject to a number of specified exceptions.

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