A quick update to our previous briefing on holiday pay claims (here):

  • Unite has indicated that it will not be appealing the recent EAT judgment in Bear Scotland v Fulton, which held that holiday pay should include non-guaranteed overtime. As explained in our briefing, the EAT’s ruling on retrospectivity is very helpful to employers and means that historic liabilities for backdated holiday pay claims will generally be limited to the last holiday year. The fact that Unite has stated that it will not appeal the judgment is comforting to employers but does not give certainty - there is still a risk that an individual employee or another union might bring a backdated holiday pay claim and seek to challenge the ruling of the EAT in Bear Scotland on retrospectivity. 
  • The Government yesterday announced that the look back period for unlawful deduction from wages claims will be limited to two years for claims lodged on or after 1 July 2015 – see the BIS announcement here. Amendments will be made to the Employment Rights Act 1996 with effect from 1 July 2015 to give effect to this announcement. 
  • The impact of this on holiday pay claims is that any claims for backdated holiday pay which are lodged on or after 1 July 2015 will be limited to a two year look back period. 
  • The Government has said that it has taken action to reduce potential backdated holiday pay costs for employers and has given certainty to workers as to the extent of their rights to holiday pay. This is true for claims lodged on or after 1 July 2015. 
  • However, any claims lodged before 1 July 2015 will be subject to the current rules on limitation. There is therefore still a risk that any claim brought before that date may include a challenge to the retrospectivity point referred to above. There is a six month window of opportunity for any potential challenger. 
  • The Government's announcement is to be welcomed though – as at 1 July 2015, businesses will be able to assess how many claims have been brought and should be able to understand more clearly the extent of their potential liability for backdated holiday pay claims. 
  • Businesses should consider putting in place a central monitoring process to ensure that any employee claims for holiday pay (or claims which involve a holiday pay element) which are brought between now and 1 July are logged centrally. This will enable them to perform an effective assessment of historic liability in July 2015.