Important limitation on historical holiday claims

On 18^th December 2014, the government introduced regulations designed to limit the impact of the Bear Scotland decision on businesses. The Deduction from Wages (Limitation) Regulations 2014 came into force on 8^th January 2015.

This creates a two-year “backstop” period on most unlawful deductions from wages claims. This applies not only to claims for holiday pay, but also extends to “wages” including commission, bonuses, fees, holiday pay and other emoluments, whether payable under worker’s contract of employment or otherwise. It does not affect claims for deductions of other types of remunerations, such as statutory sick pay, statutory maternity pay (and similar family leave payments), guarantee payments or protective awards.

The new limitation period will impact on claims issued on or after 1^st July 2015, and means that Tribunals will not be able to consider deductions where the relevant date of payment was more than two years before the date of presentation of the complaint.

Regulations 3 (which took effect on 8^th January 2015) provides that Regulation 16(4) of the WTR 1998 does not confer a contractual right to paid leave. This amendment is intended to limit holiday pay claims being brought in the civil courts as breach of contract claims although it is questionable whether it will have the desired effect as it will not affect existing claims. Furthermore, in light of the 6 months transitional period,  this could mean that this will not prevent workers with claims for holiday pay in excess of 2 years issuing proceedings prior to 1^st July 2015.