Retrospective Unpaid Holiday and Unpaid Wages Claims

Sep 01, 2015
Following a landmark decision from the Employment Appeal Tribunal (EAT) in December that non-guaranteed but compulsory overtime must be taken into account when calculating holiday pay in respect of an employee’s statutory right to four weeks’ holiday (Bear Scotland Ltd v Fulton and others), it was anticipated that there would be an influx of claims against employers for unpaid holiday pay in the form of an unlawful deduction from wages claim. 

The EAT sought to address this potential floodgate of claims by imposing a limit on the period for which employees could claim. In their judgment they held that in circumstances where there had been a gap of more than three months between any ’series of deductions’, an employee would be prevented from bringing a claim for the periods before the gap otherwise. Employees would potentially be able to claim there had been a ’series of deductions’ going back years and as long as they brought a claim within three months of the last deduction would be entitled to claim back pay for the entire period of deductions.

On 1 July 2015, the Deduction from Wages (Limitation) Regulations 2014 came into force which introduced a two year backstop period for unlawful deduction from wages claims.

Where an employer is found to have made an unlawful deductions from wages, whether in failing to pay holiday pay, in failing to pay national minimum wage or in failing to pay any other kind of commission, fee or bonus, an employee bringing a claim after 1 July 2015 will only be able to claim for a maximum of two years back pay from the date they present their claim, and will not be able to look back indefinitely and claim for the entirety of their service with their employer. 

This limitation period will not relate to claims for unpaid sick pay, maternity pay (or other family related leave pay) and employees will continue to look back indefinitely in any claim for unlawful deductions of this kind. 

Darren Hayward

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Darren Hayward

Darren joined Nockolds in 2003 and is the firm’s Managing Partner and Partner in charge of our Employment Law Team. 
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