Holiday pay issues: Update on retrospective claims

Overview: The Deduction from Wages (Limitation) Regulations 2014 ("GB Regulations") came into force in Great Britain on 8 January 2015 with the aim being to stop backdated holiday pay claims being made through the back door as breach of contract claims.

The GB Regulations have a six-month transitional period during which potential claimants can lodge retrospective holiday pay claims, provided that they can point to an unbroken series of deductions. This means that prospective claimants who have not yet lodged their claims could do so before this deadline.

What is the position in Northern Ireland?  At the time of writing we do not know whether similar regulations will be introduced in Northern Ireland. The hope would be that we do follow suit.

Summary of the journey to date: You will recall from our previous In Focus briefings on the matter of holiday pay following the EAT's decision in the Bear Scotland and others case that:

  • Non-guaranteed overtime must now be taken into account in calculating holiday pay for the minimum four weeks' statutory annual leave required by the Working Time Directive; and
     
  • For the purposes of unlawful deductions from wages claims there will be a break in the chain of any series of deductions where more than three months has elapsed between the deductions.


The Employment Rights (Northern Ireland) Order 1996 ("ERO") states that the three-month time limit in which to bring an unlawful deductions of wages claim starts to run from the last deduction in the series. There has been debate between our team, practitioners and commentators post the Bear Scotland decision about the extent to which the EAT's decision does limit the scope for employees to make substantial retrospective claims for underpaid holiday.

The GB Regulations seek to clarify this and introduce several changes to employment laws. The key points to note are:

  • The amendment of ERO's GB equivalent provisions in relation to unlawful deductions of wages claims, so as to introduce a two-year limitation period on such claims;
     
  • A new limitation period to apply to claims presented on or after 1 July 2015 in relation to wages (wages is defined as meaning any fee, bonus, commission, holiday pay or other emolument referable to the employment, whether payable under the worker's contract or otherwise); and
     
  • The inclusion of a provision confirming that the Working Time Regulations 1998 do not confer a contractual right on employees to paid leave. This amendment is intended to end speculation about whether claims for holiday pay under the WTR could be brought in the civil courts and confirms our view that claims for underpayment of statutory holiday pay may only be brought as statutory claims in the tribunal under the Working Time Regulations, or by way of a claim for unlawful deductions from wages under ERO.

We have a dedicated Holiday Pay taskforce within our team who have been undertaking legally privileged 'holiday pay audits' and advising numerous companies with operations in Northern Ireland on the implications of the holiday pay saga.  If you would like an audit, have a query or would like some further information in relation to how we can help you, please contact Gareth Walls at gwalls@algoodbody.com.

Date published: 13 May 2015