Employment e-Brief: Holiday pay claims

You will probably recall the recent decision from the Employment Appeal Tribunal of Bear Scotland v Fulton and others which ruled that non-guaranteed overtime should to be taken into account when calculating holiday pay.

When the Bear Scotland decision was announced, there was widespread concern about the impact of this decision and the potential huge cost to employers as a result of backdated claims.  As a result this, a government taskforce was set up to look to assess and limit the impact of the ruling.

It has recently been announced by the government the Deduction from Wages (Limitation) Regulations 2015 will be coming into force in order to minimise the effect of the Bear Scotland ruling.

The Regulations do two things:

• they limit all unlawful deductions claims to two years before the date the claim form is lodged (with limited exceptions, with claims for SMP, SSP and guarantee payments being unaffected); and,
• they explicitly state that the right to paid holiday is not incorporated as a term in employment contracts.  This is intended to end the speculation that claims for underpayment of statutory holiday pay can be brought in the civil courts as a claim for breach of contract.

The two-year longstop date will only apply to those claims presented after 1 July 2015, allowing a transitional period which would allow those workers with a claim potentially going back further than two years to bring a claim.

It therefore appears that the ruling in Bear Scotland is here to stay, for the foreseeable future at least.  However, further legal challenges of the Bear Scotland decision are likely to be made in the future and there is also the possibility that the new Regulations themselves could be challenged in the European courts.

For further advice please contact a member of the employment team.