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Three month gap will break “series” of deductions in holiday pay case

14th August, 2017 by Matthew Potter

NEWS

In Fulton and anor v Bear Scotland Limited, the EAT has confirmed that where there is a gap of more than three months between non-payments or underpayments of wages then this breaks the series of deductions for the purpose of bringing an unlawful deduction of wages claim.

DETAILS

This appeal concerned a long-standing dispute over holiday pay. An earlier EAT decision held that payments in respect of non-guaranteed overtime must be taken into account when calculating holiday pay under the Working Time Directive. It also decided that, when bringing an unlawful deduction of wages claim, a gap of more than three months between deductions breaks the ‘series’ of deductions. In a “deduction from wages” claim underpayments for any period can be claimed as long as the last in the “series” of deductions is within 3 months of a claim being submitted. Therefore the effect of the EAT’s ruling was to reduce the amount of back pay that can be claimed in holiday pay cases. The case was sent back to the Tribunal to apply this to determine the amount of underpaid holiday pay due.

When the case was re-heard at the Tribunal, it concluded that it was bound by the EAT’s decision and excluded all claims where a period of more than three months had elapsed between successive non or underpayments of holiday pay. The Claimants appealed to the EAT and argued that this part of the EAT’s previous decision was not binding and the presumption that a three month gap breaks a series of deductions was not an absolute rule.

The EAT rejected the appeal and held that their previous decision was binding precedent and they could not depart from it. The EAT also confirmed that a three month gap in underpayments did create an absolute rule (rather than just a presumption) that a series of deductions would be broken.

COMMENT

Matthew Potter comments: "This decision will be welcomed by employers facing claims under the Working Time Directive where they have failed to factor overtime into holiday pay. It confirms that an employer will be able to avoid or reduce back pay claims if they have made payment of the correct holiday pay for three months or more (which may be the case for holiday paid beyond the 20 days under the WTD)."

For further information or assistance with any of the matters discussed above please contact a member of the team.

© Howes Percival LLP

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