Claims for Arrears of Underpaid Holiday Pay Limited to Two Years

The Government has confirmed that it will impose a limit on backdated claims for holiday pay following the recent overtime holiday pay cases. It will legislate so that claims to employment tribunals on this issue cannot stretch back further than two years.  

It will also provide that the right to paid holiday under the Working Time Regulations 1998 is not incorporated as a term of employment contracts, so as to preclude claims for breach of contract which could potentially go back six years.

The changes will apply to claims made to the employment tribunal on or after 1 July 2015. For claims lodged in the meantime, existing limits will apply.

The Government’s announcement means that employers will be protected against claims potentially going back over a number of years. Although the EAT’s decision in Bear Scotland v Fulton limited workers’ ability to claim arrears to a large extent, there was significant risk that its decision would be overturned in a subsequent case. The Government’s decision to legislate will mean that liability for arrears will be capped at two years and will provide a degree of certainty on the issue going forwards.

The Government indicated that this is something which it has discussed with the taskforce it set up following the EAT’s judgment. However, this is not a direct output of the taskforce’s work and the taskforce continues to work through the implications of the judgment. It would therefore seem that further announcements will follow.