Employees who experience underpayments can bring claims for unlawful deductions from wages to the employment tribunal. These claims must begin (via ACAS early conciliation) within three months less one day of the last deduction. If the underpayments are part of a ‘series’ of deductions, the claim may cover earlier payments, subject to a two-year backstop.
Historically, Bear Scotland v Fulton established that gaps over three months between holiday pay underpayments broke a series. However, the Supreme Court in Chief Constable of the Police Service of Northern Ireland v Agnew overturned this, holding that gaps over three months do not automatically disrupt a series of deductions.
In the recent case of Deksne v Ambitions Ltd, the employer conceded incorrect holiday pay calculations, but the tribunal initially ruled the claim out of time because gaps between deductions exceeded three months. The Employment Appeal Tribunal (EAT) overturned this decision, confirming that gaps between deductions were irrelevant. Instead, whether deductions form a series depends on factors such as their similarity, frequency, size, impact, and what links them.
The EAT held that all holiday pay underpayments calculated in the same way were part of a series, allowing claims back to the two-year limit.
Key Takeaways for Employers
Claims for historic holiday pay underpayments remain a risk. Correcting payments will not immediately “break the chain,” and three-month gaps between underpayments no longer matter. Employers must ensure holiday pay is calculated correctly to avoid exposure to claims.
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