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Holiday pay: The ongoing saga

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By Will Macauley

In December 2014 we reported that, despite the Employment Appeals Tribunal (“EAT”) finding that employees should be paid “normal remuneration” during leave, they would be limited in their ability to claim for historic underpayments ( This was due to what is known as the “three month rule”. In general, unlawful deduction claims must be brought within three months of the underpayment or, where there is a series of underpayments, within three months of the last underpayment. However, the EAT confirmed that, where there is a series of underpayments, a three month gap in underpayment of holiday pay “breaks the chain”. This severely restricts the ability of workers to bring backdated claims.

The matter was subsequently referred back to the Employment Tribunal (“ET”) to apply the ruling to the facts of the case. The ET considered itself bound by the EAT’s decision and accordingly found a number of the claimants’ claims to be time-barred by virtue of the three month rule. The claimants appealed, arguing, amongst other things, that the rule leads to “arbitrary and unfair results”.

The EAT has now confirmed the position; employees cannot claim for underpaid holiday pay where more than three months has elapsed between deductions. This is good news for employers fearful of large claims for underpaid holiday. It is doubtful whether the claimants will be able to appeal this point any further considering the 2014 EAT decision was not appealed. However, in light of the volume of holiday pay litigation currently before the Tribunals, the issue may well be considered further in future.

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