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Holiday pay - ramifications from the Bear Scotland decision
Both the government and the Presidents of the Employment Tribunal have recently announced action resulting from the important decision in Bear Scotland Ltd v Fulton.
We recently reported on the significant judgment on what employers should include when calculating holiday pay. In an effort to minimise the retrospective impact of the decision and to give greater certainty the government has announced that it will be introducing new regulations.
The proposed regulations will provide that (save in certain limited exceptions) claims for unlawful deductions from wages cannot be brought in respect of payments which fall more than two years before an ET1 is lodged. They will also state that the right to paid holiday is not incorporated into employment contracts. The intended combined impact will be to prevent the potentially significant impact of large backdated claims for holiday pay.
It is intended that the regulations will be effective from 1 July 2015, meaning that there is a small window in which workers with existing claims for unpaid holiday stretching back more than two years may be able to bring their claims. Nonetheless, as we reported previously, the decision in Bear Scotland currently makes it difficult for workers to bring backdated claims as any break of three months between underpayments of holiday entitlement will 'break the chain' of deductions.
Turning to practical issues, the Presidents of the Employment Tribunals in England, Wales and Scotland have issued guidance on the procedure that employees can follow in order to amend existing claims for holiday pay that they might already be pursuing against their employer. Claimants may now apply for an existing claim for holiday pay to be amended to include holiday pay that has only accrued after the original claim was commenced - so could not be claimed when the original claim was started.
This guidance potentially saves Claimants from issuing a brand new claim (and incurring a fresh issue fee for doing so) which they would have been required to do previously in order to bring their claims up-to-date.
Employers may continue to oppose a Claimant's application to amend the original claim to include accrued holiday pay, and will usually have seven days from the date of the Claimant's application to do so.