Holiday Pay- limit to backdated claims

31st January 2015 We wrote in November about the decision in the case of Bear Scotland Ltd v Fulton. In that case the Employment Appeals Tribunal (EAT) ruled that the calculation of holiday pay should include the payments of overtime that the employee has earned (see article November 2014). The Government had been very worried about the likely effect of the judgment in that case, and set up a group to consider the effect of the case. It is clear that the main worry had been about the possibility that the claims for additional holiday pay resulting from that case could be backdated over many years. In fact the EAT's decision potentially restricted this through the part of the ruling dealing with the issue of historical non-payment of overtime in holiday pay.

The Government has announced that it will impose a limit on the length of time that claims for deductions from wages can be pursued. The Regulations that will address this will only effect cases brought in the Employment Tribunal from the 1st July 2015. Until then the existing rules on limitation of such claims will remain in effect.

The Regulations will do two things. Firstly limit all claims of unlawful deductions to two years before the date of the claim being submitted to the Employment Tribunal (except for claims for Statutory Sick Pay, Statutory Maternity Pay and Guarantee Payments- which will not be effected). Secondly the Regulations will state that the right to paid holiday is not incorporated as a term in employment contracts. The latter also stops cases going to the County Court or High Court for breach of contract over the long term failure to pay holiday pay.

The Regulations therefore will have the effect of requiring all claims for unpaid holiday pay to be brought within the Employment Tribunals as a statutory claim rather than a contractual claim.

Employers need to consider the effect of the Bear Scotland case, and ensure that overtime is factored into the value of holiday pay. If you need any help or advice in respect of this issue we can provide the guidance you need at Hallett Employment Law Services Ltd.