Backdated Holiday Claims

This month also saw a significant decision from the Supreme Court regarding holiday pay. Reaching its determination in the case of Chief Constable of the Police Service of Northern Ireland v Agnew the Court held that a gap of three months or more between a series of deductions will no longer prevent a successful claim for unlawful deduction of wages.

This decision overturns the EAT’s decision in the case of Bear Scotland v Fulton where it was held that a gap of more than three months between underpayments of holiday pay would break the series of deductions required to bring an unlawful deduction from wages claim for underpaid holiday pay.

By way of reminder, section 13 of the Employment Rights Act 1996 makes it unlawful for an employer to make a deduction from a worker’s wages unless it is required or authorised either by statute or a provision in a worker’s contract, or the worker has previously consented in writing to the deduction.  A claim for unlawful deduction from wages must also be brought within three months from the date of the alleged deduction. Where a complaint is brought in respect of a series of deductions, the time limit begins to run from the date of the last deduction in the series.

The Supreme Court concluded that by having a cut off after an interval of three months risked undermining the purpose of the legislation which was designed to protect workers from being underpaid and exploited.  As a result, most employees bringing these types of claims will now be able to recover up to two years’ worth of losses where employed in Great Britain and considerably more in Northern Ireland, where such claims can be backdated to 1998.

What next for employers?

Employers concerned that they may have incorrectly calculated holiday pay and may therefore be at risk of claims for unlawful deductions from wages from their workers will no doubt want to review their calculations. If it appears that there may have been an underpayment then they would be would be advised to obtain legal advice on how to manage and rectify the situation. Indeed, it may well be best to correct the underpayment sooner rather than later as this should have the effect of defeating a claim for a claim for unlawful deduction from wages where the limitation period remains three months from the last unlawful deduction.

Finally, it is also worth remembering that this decision affects all unlawful deductions from wages claims and is not just those which relate to the miscalculation of holiday pay.

Please get in touch if you have any questions regarding the issues discussed in this article.

E: help@jma-hrlegal.co.uk / T: +44 (0)1252 821792