Holiday Pay Claims: Latest Developments

New U.K. regulations provide that all holiday pay claims brought on or after 1 July 2015 are subject to a two-year backstop period.  

The Deduction from Wages (Limitation) Regulations 2014 were brought in following the landmark ruling in Bear v Fulton. By way of a reminder, the Employment Appeal Tribunal decided in Bear that non-guaranteed overtime which formed part of “normal remuneration” should be included in the calculation of holiday pay. This led to concerns that potential exposure to claims could go back indefinitely. The new two-year backstop under the regulations limits the exposure to two years. The regulations apply not only to claims for holiday pay, but to "wages" generally, which also include commission and bonuses.    

Separately, the Northern Irish Court of Appeal (Patterson v Castlereagh Borough Council) has suggested that voluntary overtime (as well as non-guaranteed overtime) may also need to be included in the calculation of holiday pay. Although this decision is not binding in England, it is likely to be of persuasive authority. If it is followed, this would be likely to lead to an increase in the amounts claimed (albeit such claims would probably still be limited by the two-year backstop). There will no doubt be further litigation in this area, and we will keep you updated on developments.