Holiday pay update: Unlawful deductions and backpay claims

Holiday pay update: Unlawful deductions and backpay claims

The current law

The law on holiday pay has been through a number of twists and turns in recent years.

Where a worker claims that they are entitled to unpaid holiday, one option open to them is to bring a claim for unlawful deductions from wages under the Employment Rights Act 1996. This piece of legislation requires that such a claim must be brought within three months of the last in a series of deductions.

The case of Bear Scotland Ltd v Fulton restricted the implication of this section by finding that where more than three months has elapsed between deductions, this breaks the series of deductions.

Is Bear Scotland still good law?

A recent decision of the Court of Appeal in Northern Ireland has brought into question whether this case law was determined correctly. In the case of Chief Constable of Northern Ireland Police v Agnew, the court concluded that a ’series’ is not necessarily broken by a gap of three months. Northern Ireland have equivalent provisions to the Employment Rights Act 1996 and the court could not see that there was either an express or implied intention in the legislation to impose such a limit.

Bear Scotland remains at this time good law for tribunals in Great Britain, but it is likely that the decision in Chief Constable of Northern Ireland Police v Agnew will be persuasive authority in the future.

Implications and action points

If a future case which was binding on our tribunals in Great Britain were to concur with the decision in Chief Constable of Northern Ireland Police v Agnew then it is likely that we will see holiday pay claims going back a longer period of time particularly where the underpayments are factually linked. Currently in Great Britain there remains a two-year backstop date although this has not entirely avoided criticism either in recent times. 

Whilst at the moment this decision is not binding on our tribunals, it is a suggestion of how the law may move in the future. It is a good time for employers to consider carefully how they are categorising the people who work or are providing services to them to ensure they are not putting themselves at risk of large holiday pay claims in the future. It is also important to carefully consider what elements of pay are being included in a worker’s holiday pay and that this is compliant with current case law.

Other changes 

April 2020 will see a number of employment law changes including changes to the reference period when calculating holiday pay entitlement and changes to the level of detail needed in written terms and conditions. Now is therefore a good time to review your contracts of employment and working practices.

If you have any questions, please speak to a member of the employment team