Update on potential liability for holiday pay claims

This could come at a significant  cost for some employers and cause widespread financial damage. Two recent developments , will hopefully make the burden of potential claims more manageable.

1. To limit the damage to businesses that may arise through holiday pay claims, the government has introduced draft Regulations which will mean that an employee who considers that they have been underpaid when on holiday will only be able to claim for the last two years. This will stop the nightmare of claims possibly dating back to 1998, when the Working Time Regulations were introduced.

The down side is that the Regulations will not apply to claims brought before 1 July 2015. This could therefore result in an increase in holiday pay claims at the start of this year to try and beat the new restriction. It is therefore crucial to ensure that you have considered how you are going to calculate holiday pay where workers regularly receive overtime payments.

2. As reported in our recent briefing, the EAT ruled in the Fulton case that if an employee is claiming a series of unlawful deductions, they will be barred from bringing claims where the series of deductions has been broken by either the employee not taking holiday or being paid correctly for a period of three months or more. This ruling put a significant limitation on employees’ ability to bring claims for backdated holiday pay and  it was therefore expected that an appeal of this point would be imminent.  Unite the Union (who represented a number of the Claimants in the case) confirmed recently however, that they will not be appealing this point. Whilst it does not rule out the possibility of an appeal in another case, the law on this point looks like it will be settled for at least a few months!

The developments mean that employers who have not historically paid holiday pay correctly may still face uncertain costs regarding back dated pay and it is crucial to ensure that you have considered holiday pay calculations where workers regularly receive overtime payments.

If you would like to purchase a copy of our Holiday Pay and Ovetime FAQs toolkit, which addresses some of the key questions arising from the case, or for more information on this subject, please contact Matthew Wort or Kate Watkins in our employment team on 0121 212 7494 or email matthew.wort@anthonycollins.com or kate.watkins@anthonycollins.com.

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