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EAT confirms that a series of deductions is broken by gaps of three months or more!

Written by Brabners LLP

You will no doubt remember the flurry of holiday pay cases over the last few years. In Bear Scotland Ltd v Fulton and another, Mr Justice Langstaff gave the leading judgment of the EAT and confirmed that non-guaranteed overtime must be taken into account when calculating holiday pay for the minimum four weeks’ statutory annual leave required by the Working Time Directive. However, where claims for underpaid holiday pay are brought as claims for unlawful deduction from wages, they must be submitted within three months of the last in a ‘‘series of deductions’’. Langstaff J went on to confirm that there will be a break in any ‘‘series of deductions’’ where a period of more than three months has elapsed between the deductions. That was the position back in 2014. The case then returned to the Tribunal to consider the claimants’ individual circumstances. At the remitted hearing, the individual claimants sought to argue that Langstaff J’s conclusion that a three-month gap between deductions breaks any ‘‘series of deductions’’ was not part of the overall reasoning of the decision. The Tribunal rejected this argument, and subsequently held that the majority of the claimants’ claims were out of time. The Tribunal’s decision was then appealed against to the EAT. On appeal the EAT re-stated that a three month gap between underpayments of wages breaks a ‘‘series of deductions’’. In making this decision, the EAT confirmed that Langstaff’s J’s interpretation of a ‘‘series of deductions’’ was a fundamental part of the reasoning of his decision in Bear Scotland Ltd v Fulton and another. It is now clear that this reasoning is binding. This EAT decision means that where claimants do not bring a claim for unlawful deduction of wages in a timely manner then the chain of deductions is likely to be more easily broken, and this in turn would affect the value of the claims brought. This decision has the effect of reducing the scope for workers to make substantial retrospective claims for underpaid holiday and providing certainty of this part of the law for businesses and employers.

Disclaimer: This bulletin is for general guidance purposes only and should not be used for any other purpose. This article is written by Brabners and reproduced with their permission. Brabners is a Limited Liability Partnership.