Holiday Pay Update – Bear Scotland

Background to the case

The Employment Appeal Tribunal previously decided (Bear Scotland Ltd. v Fulton and others, see here) that all elements of a worker’s ‘normal remuneration’ must be taken into account when calculating the minimum four weeks’ statutory holiday pay that is required by EU law. This will include all payments that are directly or intrinsically linked to the worker’s normal day-to-day work, including payments for non-guaranteed overtime.

In addition, where claims for underpaid holiday pay are brought under the unlawful deductions from wages provision, they must be submitted within three months of the last in a ‘series of deductions’. Gaps of three months between deductions will break this series.

The Employment Appeal Tribunal’s decision

The case then returned to the employment tribunal to determine which of the alleged deductions from pay had been brought within the requisite three month time limit. The tribunal confirmed that claims for holiday were time-barred when three months or more had elapsed between successive non-payments. The employees appealed to the Employment Appeal Tribunal, which upheld the tribunal’s decision. Unsurprisingly, it considered itself bound by the 2014 Bear Scotland Ltd. decision. It should now be clear that the three month time limit is an absolute bar to claims for holiday pay, subject to the tribunal’s discretion to extend time.

Comment

The latest decision in this long-running series of cases about holiday pay, should give employers some comfort when faced with claims that could have potentially gone back several years. Now, in cases where an employee alleges that a series of deductions have been made from their holiday pay (or other type of remuneration), that series will be broken where there has been a three month gap between deductions. In addition, the last deduction must have occurred in the three months before the employee began their claim.

Of course, the main point from the initial Bear Scotland Ltd. case, that all payments that are directly or intrinsically linked to the worker’s normal work must be included when calculating statutory holiday pay, still applies.

Because annual leave under regulation 13A of the WTR 1998 (the additional 1.6 weeks’ entitlement) may still be calculated in accordance with the week’s pay provisions of ERA 1996, payment under that formula will not represent an underpayment. In some cases, the “compliant” payments in respect of the additional 1.6 weeks’ holiday will ensure that the series of deductions is broken in every holiday year, as there will be gap of at least three months between periods of non-compliant payments.