Holiday Pay: series of deductions broken by gaps of three months or longer

The Employment Appeals Tribunal has confirmed that a three month gap breaks the series of deductions in the context of an unlawful deductions claim. This will provide employers who are facing holiday pay claims with some welcome news.

Background

In Fulton and another v Bear Scotland Ltd (No.2), Fulton and Baxter (‘the Claimants’) brought a claim against the Respondent for unlawful deductions from wages. They claimed that overtime and other payments such as standby and call-out had been excluded from the calculation of their holiday pay. The Claimants argued that this was contrary to the Working Time Regulations 1998.

The original tribunal found that the Respondent had made unauthorised deductions, as all of the original payments received should have been taken into account when calculating holiday pay.

The Respondent appealed on the basis that the majority of the claims were out of time. They argued that the monetary amounts claimed were not, on the whole, an unbroken series of deductions.

The EAT agreed and sent the case back to the tribunal for reconsideration. The tribunal made findings as to which claims were and were not in time and the Claimants re-appealed to the EAT.

Findings

The EAT rejected the Claimant’s appeal and this ruling has confirmed the following points:

  • Underpaying holidays, here by excluding certain payments from the calculation of holiday pay (such as overtime or commission) amounts to an unlawful deduction from wages.
  • Under section 23 Employment Rights Act 1996, any claim for unlawful deduction from wages must be made to the employment tribunal within 3 months of the deduction or ‘the last in a series of deductions’.
  • ‘Series’ will require a chain of underpayments to be linked by both time and cause. If they are too far apart or for diverse reasons they will no longer count as a series. This means that any falling more than 3 months from the claim will be out of time.
  • ‘Too far apart’ was confirmed as meaning anything over 3 months.

Comment

This ruling confirms the position that, where a claim for unlawful deduction of wages is brought, a period of any more than three months between deductions will break the series of deductions. Claimants will therefore need to ensure that they bring claims in good time.

For more information on calculating holiday pay please contact the Devonshires Employment Team.

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