After a recent Employment Appeal Tribunal (EAT) judgment, the government has introduced new measures to reduce the potential value of claims brought by workers’ who are owed holiday pay.
In November 2014, the EAT decided that holiday pay should reflect non-guaranteed overtime, which is overtime that employers are not obliged to offer but a worker must work if it is offered.
The government announced on 18 December that it was taking action to protect UK employers from the potentially damaging impact of large backdated claims.
Changes made to regulations under the Employment Rights Act 1996 will mean that workers bringing claims to employment tribunals on the issue cannot go back further than two years when calculating the pay they believe they are owed.
Workers will be able to make claims under the existing arrangements for the next six months, which will act as a transition period before the new rules come into force. The changes will apply to claims made on or after 1 July 2015.
Palmers’ employment law specialist Lara Murray said: “This clarification and two-year back claim limit will be very welcome to many employers, who were concerned about claims for holiday pay going back for much longer periods.
“However, there is still an opportunity for employees to make claims going back further than two years up until the end of June, although it is important to remember that workers cannot make a claim more than three months after the last incorrect payment.
“Employers facing such a claim may find it helpful to seek expert employment law advice on their obligations and employees’ rights in such cases.
“Meanwhile, a further development in another case with implications for employers is due in February. In the case of Lock v British Gas Trading Ltd, the Court of Justice of the European Union last year ruled that, in some circumstances, holiday pay should include a worker’s commission payments.
“An employment tribunal in Leicester is due to consider the decision in February 2015, which should provide greater clarity on the relevant reference period for calculating holiday pay. For more information and guidance on holiday pay, or any employment law issue, please contact our employment law team”.