1 July - Two year cap on backdated claims for holiday pay
From 1 July 2015, the Deduction from Wages (Limitation) Regulations 2014 limits the period of time in respect of which employees can claim backdated, underpaid holiday pay to a period of two years. This will apply only to cases raised on or after 1 July. This means that claims for underpaid holiday pay will not be allowed where the date of the payment in question was more than two years before the Tribunal claim was raised. These Regulations are a direct result of the decision in Bear Scotland which decided that non-guaranteed overtime payments should be included in holiday pay calculations. The EAT also held in the Bear Scotland case that claims will be time barred where there has been a break of more than three months between the successive underpayments, thus severely limiting an employee's entitlement to claim any backdated unpaid sums.
Northern Ireland appeal case
On 28 November 2014, in Patterson v. Castlereagh Borough Council, the Northern Ireland Industrial Tribunal (NIIT), relying on the Bear Scotland case held that voluntary overtime was not part of normal remuneration for the purposes of the Working Time Directive and was not therefore required to be included within holiday pay payments. The Northern Ireland Court of Appeal have recently overturned the Tribunal's decision on this point. This means that voluntary overtime may well require to be taken into account when calculating holiday pay. The Northern Ireland Court of Appeal did not provide guidance on this point but rather made the point that it will be a question of fact, for each Tribunal to consider, based on the circumstances of each case.
Employment Tribunal approach - Scotland
According to a recent circular issued by the Employment Tribunal in Scotland, there are currently just under 21,000 claims lodged for holiday pay in the Employment Tribunal in Scotland involving around 321 employers. The Employment Tribunal has recognised that the law has been and remains unclear in this area. With agreement of the parties involved, the Employment Tribunal's approach has been to sist (freeze) cases to allow time for the law to develop with decisions being handed down by the Employment Appeal Tribunal and other appellate courts which can then be applied to the cases that have been raised.
It will be very interesting to see how the law develops albeit the decision in Bear Scotland and the Regulations, in force from 1 July, have very much taken the sting out of the situation from an employer's perspective.