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Holiday pay case gives new right to claim wages unlawfully deducted

ANYONE who is paid less when on holiday than when they are working could be entitled to claim they have been underpaid for the past 16 years.

A new European ruling means employees across the UK will be able to claw back lump sums in back-pay from their companies.

The new law will benefit anyone whose normal pay packet includes amounts for overtime and shift payments, but who don’t get these payments when they take holidays.

The European Court of Justice has confirmed in a case referred to it by the UK Employment Tribunal that payments for night working and regular commission have to be recognised in holiday pay.

Backdating holiday pay 

Backdating may go as far back as 1998, when the Working Time regulations were introduced. If the proper amounts have not been paid since then, individual claims could amount to hundreds of pounds.

Employers are urging the UK Government to introduce emergency legislation to limit backdated bills for after it was estimated that the ruling could cost small businesses millions of pounds in total. Some manufacturers’ organisation have said the claims could put many companies out of business.

The case arose when a British Gas salesman, Mr Lock, took the company to a Tribunal, because he was losing more than half his average earnings when on leave.

The ECJ in Luxembourg has now sent the case back to the original Tribunal to decide what Mr Lock is entitled to. The Employment Appeal Tribunal is due to consider related cases on whether overtime payments should also be included in holiday pay, including a case which was originally brought in the Employment Tribunal in Glasgow and found for the employee, Fulton v Bear Scotland Ltd.

Legal advice for employers and employees

It will be important for both sides to get legal advice. The usual Tribunal rule is that claims have to be brought within three months the deduction or underpayment, or they are out of time or “timebarred”. However, if the employee can show there has been a series of deductions going back several years, he or she will be allowed to go back much further. Visit our Employment Law page for more information. 

In Scotland, the Sheriff Court also allows claims for breach of contract to be pursued for up to five years after there has been a failure to make a payment due under an employment contract.

Employers who pay commission or overtime but do not include it within holiday pay calculations are likely to want to change their payroll arrangements now, but that won’t protect them for past wages claims.

Any such changes will also have to be agreed with the employees concerned, or could be adjudged to be invalid, and amount to a separate breach of contract.

The Lock cases follows a similar ruling by the ECJ in a case brought against British Airways by pilots who were allowed to claim back sums that should have been added to their holiday pay to reflect unsociable hours and other extra payments. The ECJ insists that employees should not be given a disincentive not to take their holidays, as it is important for their health and welfare that they have proper breaks. That case resulted in John Lewis Plc agreeing to pay £40m to staff in back-dated holiday pay.

Contact Us

Any employees who want to make claims or employers who wish to review their payroll practice in line with the ruling can obtain advice from The Glasgow Law Practice. The initial call is free. e-mail Stephen Smith on ss@theglasgowlawpractice.co.ukLouise Bain on lb@theglasgowlawpractice.co.uk, or call on 0141-248-2999.