22nd December 2014

Holiday Pay - Limit On Backdated Claims

Following the widely publicised case of Bear Scotland and others which was decided by the EAT last month, Vince Cable established a Task Force to assess the potential impact of the decision.  The Bear Scotland case received significant attention following the ruling that overtime should be included in holiday pay.  Many businesses feared substantial backdated claims for holiday pay.

Draft regulations were placed before Parliament on 18 December.  These regulations set a maximum back pay liability for any claim for underpaid holiday of two years.  It is important to note that the draft regulations will only apply from 1 July 2015.

The two year limitation on backdated claims will apply equally to all claims regarding unlawful deductions from wages, not just those concerning holiday pay.  The draft regulations will also prevent individuals from pursing claims through the civil courts in a bid to go back further than two years.

This is positive news for employers.  However, there remains a six month window before the regulations come into force in which employees who bring claims might still seek to go back further.  The Bear Scotland decision provided that for the purposes of backdated claims, any gaps between holidays of three months or more breaks the chain and thus would serve as a backstop.  This point may be challenged on appeal, however, for now employers will hope that this aspect of the case can be used to limit any claims lodged in the interim period.

Jack Boyle
Senior Solicitor – Employment Law



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