Back in 2014 the EAT in Bear Scotland Ltd v Fulton and two other linked cases considered how the holiday pay of workers who work non-guaranteed overtime should be calculated. The EAT held that the Working Time Directive requires an employee or worker on holiday to receive the "normal remuneration" that they would have received had they been at work. This had to reflect non-guaranteed overtime, plus taxable elements of allowances that were directly linked to work. (The Lock case established that the same principle applied to sales-related commission.)

The normal time limit for bringing an unauthorised deduction of wages claim is three months from the date of the deduction. Where there has been a series of deductions, the time limit begins to run from the date of the last deduction. The first appeal decision in Fulton found that to form part of a "series of deductions" there must be a gap of less than three months between the underpayments. As a result, where a period of more than three months has elapsed between successive underpayments of holiday pay, unauthorised deduction claims relating to holiday taken before that period would be out of time. That approach was adopted when the claims returned to the Tribunal. But the claimants appealed again, arguing that the earlier EAT decision created a presumption rather than a rule.

The appeal has now been rejected by the EAT. The earlier EAT decision about the correct approach to time limits where there has been a series of deductions formed part of the decision and was therefore binding on employment tribunals. None of the limited circumstances in which the EAT will go back on one of its own earlier decisions applied. If the claimants had wanted to challenge that point they should have appealed the first EAT decision to the Court of Appeal.

A cap of two years on claims for back pay in unlawful deduction from wages cases was introduced in the wake of the first Fulton EAT decision. This latest case has further reduced the risk that employers will face unauthorised deduction of wages claims in respect of holiday pay in previous years.