Holiday pay claims now – an effective remedy?

The “Bear Scotland” case decided that holiday pay should be calculated including overtime even where not contractually guaranteed. The government response has been the enactment of new regulations which will apply to claims issued after July 2015. Those regulations cap the period of back-claiming of most unlawful deductions from wages at two years. (Previously, the view has been that such a claim could potentially be dated back to the commencement of the legislation which gave the relevant right).

It’s understandable that employers will welcome the comfort that this apparently brings. But is that comfort guaranteed?

Back in the distant employment law past, there was a similar law relating to claiming back pay on equal pay claims. The back-claiming period was similarly limited to two years. This was found by the European Court of Justice in the 1999 Levez case to be against the principles of equivalence and effectiveness. When breach of contract claimants in the civil courts could claim back for up to six years, limiting the equal pay related period for similar claims was not an effective remedy. Equal pay law now provides for period of six years for back-claiming.

Given that the right to statutory holiday pay also comes from the EU, isn’t there a pretty good chance that the same effectiveness argument applies here too?

The government apparently take the view that the six month transitional period deals with the effectiveness point – that those with an existing claim will be able to bring their claims for the “full” back period until July 2015. But this change to the law isn’t just about holiday pay – it affects all potential deductions from wages except those related to maternity and certain other family rights. So the transitional period doesn’t really deal with claims for individuals that arise in the future.

Employers: UK legislation has been shown to be wrong according to EU law already in Bear Scotland (and of course in Levez before that). It’s probably a good idea to get your house in order regarding payment of wages, holiday pay etc just in case the two year backstop turns out to be wrong too. And don’t forget that many deductions relate to contractual rights which can be pursued back six years in the civil courts even if not in the employment tribunal.

As a postscript, it’s rather doubtful that the new law will help employers with Bear Scotland type claims, given that one would assume that those with such claims will take advantage of the transitional period and lodge their claims prior to July to take advantage of the “old” law.

Alison Humphry
Partner, Workwise Legal