Holiday pay claims limited to two years- damage limitation by Regulation
Recently the law was established that the amount of wages paid to an employee on holiday should include wages that have been paid to them for overtime that they have been obliged to do. This opened the door to Tribunal claims for underpaid holiday pay going right back to when the legal right to paid holiday was granted in 1998.
This right could amount to serious cost levels of liability for some businesses and cause widespread financial damage. To limit this damage, the government has introduced some new draft Regulations which will stop claims going back more than two years. They are called the Deduction from Wages (Limitation) Regulations 2014.
This new law will mean that an employee who considers that they have been underpaid when on holiday will only be able to claim for the last two years. This will stop the nightmare of possible claims for the underpayment times up to sixteen years, times the number of employees affected. For a smaller business, perhaps with several employees with the same claim, up to sixteen years could add up to a very serious sum. The new law will mean that the pain will be limited to the underpayment times two years, times the number of employees affected. Still bad enough, perhaps, but much more manageable.
The down side is that the Regulations do not apply to claims started in the Employment Tribunal or the Civil Courts before 1 July 2015. The reason for this delay in implementation is probably to stop the European Courts saying that the two year rule is unlawful, because the UK can argue that employees who think they have been underpaid do have the chance to get their claims in before 1 July 2015. It will be interesting to see how many employees decide to get a claim started during the first six months of 2015. At least after that employers will know that the new Regulations will limit their potential liability to two years.