On 18 December 2014 the Government published a press release stating the action it intends to take to reduce potential costs to employers and give certainty to workers on their rights on holiday pay.
Last month we reported on the controversial and widely publicised judgment of the Employment Appeal Tribunal in the case of Bear Scotland v Fulton. Following this decision the Government set up a taskforce of representatives from government and business to assess the financial exposure employers face and how to limit the impact on businesses. We have recently hosted two successful workshops for local businesses on the matter discussing, amongst other things, what action the Government’s taskforce might take to protect UK businesses from the impact of this decision.
The Government’s announcement was that it is introducing the Deduction from Wages (Limitation) Regulations 2014, which will do two things:
1. Cap back pay claims at two years. This means that claims to an Employment Tribunal for unlawful deduction of wages (including underpayment of holiday pay but not including certain specific deductions such as SMP, SSP and guarantee payments) cannot stretch back further than two years from the date the ET1 is lodged; and
2. Explicitly state that the right to paid holiday is a separate statutory right and is not incorporated as a term in employment contracts. This is designed to prevent employees bringing breach of contract claims in the civil courts, where the limitation period is 6 years.
The overall effect of these regulations is to remove any chance employees have of bringing long-term claims for underpayment of holiday pay, either in the Employment Tribunals or civil courts.
The changes will apply to any claims made on or after 1 July 2015, so workers will still be able to bring claims under the existing arrangements for the next 6 months. This is intended to act as a transition period before the new rules come into force. It will be interesting to see if there will be a flood of claims in the next 6 months from employees with potential long term back pay claims who are willing to gamble before the regulations come into force.
The release also states that the taskforce is continuing to work through the issues and implications of the ruling. This suggests that this may not be the only action taken by the Government in relation to holiday pay. Indeed, there still remain a number of unanswered questions, as we have highlighted in our previous articles.
We will of course, continue to keep an eye on these issues and keep you informed and up to date.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).