A break of 3 months or more limits the ability to recover underpaid holiday pay.

An Employment Appeal Tribunal (EAT) case has now dealt with the issue of whether a break in a series of underpayments in holiday pay can limit liability.

In the case of Bear Scotland Ltd v Fulton and another [2015] IRLR 15, two workers made a claim against their employer for unlawful deduction of wages – they claimed they had been underpaid when they took holiday leave. The workers argued that the payments they regularly received for non-guaranteed overtime, such as being on stand-by duty and on emergency call out, should be included. It was held that non-guaranteed overtime must be taken into account in calculating holiday pay for the minimum four weeks’ statutory annual leave. It was also decided that a series of deductions of holiday pay (underpayments) could be broken by a gap of 3 months or more – this meant that any claims had to be issued within 3 months of an underpayment or be out of time rather than within 3 months from the last underpayment in a series.

The EAT has now confirmed this position. In Fulton and another v Bear Scotland Ltd (No.2) UKEATS/0010/16, it has been decided that if a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there is a break of 3 months or more between an underpayment of holiday pay. This means that a claim for a series of holiday underpayments will only go as far back in that particular series of underpayments. That series will be broken if there is a ‘gap’ of 3 months or more between underpayments, meaning that any underpayments which pre-date the start of the ‘gap’ cannot be claimed.

This effectively limits employers’ retrospective liability. Workers can only bring a claim for past unlawful deductions within three months of the most recent deduction. The ‘series of deductions’ within the Tribunal’s jurisdiction ends where the worker worked for a 3 month period without taking any holiday. Recover is also limited by the Deduction from Wages (Limitation) Regulations 2014 (SI 2014/3322), which introduced a two-year backstop date for claims brought on or after 1 July 2015.

If you would like further information or advice please contact James Simpson or Jasmin Dhillon on 01494 478 671 or jfs@blasermills.co.uk & jad@blasermills.co.uk.