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News - Cap on holiday pay claims

View profile for Kate Fretten
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The government has introduced the Deduction from Wages (Limitation) Regulations 2014 following on from the recent Bear Scotland case involving holiday pay. The new regulations do two things:-

1. Limit the majority of unlawful deductions claims to two years before the date a claim form is lodged with an employment tribunal (the exceptions being certain categories such as claims for statutory maternity pay, statutory sick pay and guarantee payments, which remain unaffected); and,

2. Explicitly state that the right to paid holiday is not incorporated as a term in employment contracts.

The effect of these changes is to remove any chance employees have of bringing long-term claims for back holiday pay, either in the tribunal or civil courts. However, the new regulations do not apply to claims presented before 1st July 2015 so claimants could get claims in now.

3. ​​Anyone remember Preston v Wolverhampton? The ECJ held that the UK’s backstop of two years on equal pay claims was unlawful, and the two year limit had to be removed. But that argument is unlikely to succeed here, partly because of the lesser nature of the right to holiday pay (Directive, as opposed to Article in the Treaty of Rome), and also because the six month delay in implementation gives workers a real chance to put in their claims (which is relevant to proportionality).

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Employment Partner Kate Fretten says, “These regulations are not a surprise given the government’s stance on holiday pay and are a result of the task force that was set up after the Bear Scotland decision. There may be a legal challenge to the regulations after the ECJ held in a previous case that the UK’s backstop of two years on equal pay claims was unlawful.” However, any challenge is likely to be unsuccessful, partly because of the lesser nature of the right to holiday pay (an EC Directive as opposed to an Article in the Treaty of Rome), and also because the six month delay in implementation gives workers a real chance to put in their claims, which is relevant to proportionality.

At Frettens, all of our solicitors offer a free initial meeting or chat on the phone to answer your questions. If this article raises issues for you or your business, please call us on 01202 499255 and Kate or Paul will be happy to discuss it with you.

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