How Far Back Can an Employee Claim Underpaid Holiday Pay?
In Fulton & Another v Bear Scotland Ltd (No 2), the Employment Appeal Tribunal (EAT) considered whether a three-month gap between underpayments of wages breaks a series of deductions...
... and therefore limits the scope to bring retrospective claims for underpaid holiday pay.
Best Practice
In Fulton & Another v Bear Scotland Ltd (No 1), the EAT confirmed that non-guaranteed overtime must be taken into account when calculating holiday pay for the statutory minimum four week annual leave entitlement required by the Working Time Directive.
This latest decision is relevant to employees' claims for unlawful deductions from wages in respect of underpaid holiday following the decision in Bear Scotland (No 1). Such claims are required to be brought within three months of the last in a series of deductions, which is not defined in legislation.
In this decision, the EAT confirmed that where a period of more than three months has elapsed between the deductions, this will break the chain of any series of deductions.
At present, under the Deduction from Wages (Limitation) Regulations 2014, unlawful deductions from wages claims are subject to a two-year long stop period. This finding further limits the scope for workers to make substantial retrospective claims for underpaid holiday.
Facts
David Fulton and Douglas Baxter, were employed by Bear Scotland Ltd, a company that carries out road construction and maintenance of Scottish roads. Their weekly working hours varied, but they were entitled to be paid overtime for each hour they worked above a certain threshold and were obliged to work overtime if reasonably requested to do so. They were also entitled to a higher rate for night shift work, standby payments and emergency call-out payments.
The Claimants did significant amounts of overtime and regularly worked night shifts, however their holiday pay was calculated according to their basic pay for hours worked on day shifts. They therefore argued that there had been a failure to include overtime and other payments associated with their work in calculating the holiday pay due to them. They brought claims against Bear Scotland in the Employment Tribunal (ET) for the unauthorised deduction of wages.
The ET found that Bear Scotland had made certain unauthorised deductions from the Claimants' holiday pay. Following Bear Scotland's appeal to the EAT, (Bear Scotland No.1), the case was remitted back to the ET to consider which of the claimants' unlawful deductions claims were in time. The ET held that the majority of the claims were out of time, as the underpayments claimed were broken up by periods of at least three months during which time no deductions had occurred.
Decision
The Claimants' appeal to the EAT (Bear Scotland No.2) was dismissed. It held that none of the circumstances which might entitle the EAT to depart from its previous decision on the interpretation of series of deductions applied to the present case. This was a clear rule subject to an equitable discretion to extend time, and not a strong, yet rebuttable presumption (as the Claimants had sought to argue).