If you’ve made an unlawful deduction from an employee’s wages, he or she has 3 months to bring a claim. But if you repeatedly do this, an employment tribunal will see it as a series of deductions, in which case the employee has 3 months from the last in the series to bring a claim.
But what is a series? What if once a year a similar deduction is made? Can the employee go back years?
No, the employee cannot. For two reasons:
- One rule that emerged from the recent cases on holiday pay is that if there has been a break of three months between deductions, that will “break the series”, so the employee cannot claim for deductions before the 3-month break. Some employees recently tried to argue that decision by the Employment Appeal Tribunal (EAT) was not firm law, but the EAT has recently confirmed that that is solid law and should be applied by employment tribunals to similar cases.
- Since 1 July 2015, a claim at an employment tribunal for unlawful deductions wages can only go back two years. The specific purpose behind this rule was to limit the time that someone could claim for underpaid holiday pay, though it applies to other unlawful deductions claims too. The time limit does not, however, apply to breach of contract claims – employees still have 6 years for such a claim. But the legislation states that a claim for underpaid holiday pay is not a contractual claim.
For more on holiday pay, you may want to see this blog of ours. But in brief, all workers in the UK are entitled to 5.6 weeks paid holiday each year. At least 4 weeks of that must be paid at the employee’s normal rate of pay – and that doesn’t mean just basic pay; if paid overtime and commission, for example, are normal, they must also be included in holiday pay, so that the employee isn’t discouraged from going on holiday. For the final 1.6 weeks there is more flexibility – that is because it is only the leave guaranteed by European legislation that is protected in this way; some commentators have dubbed that ‘euroleave’.
Let’s look at an example. An employee is paid for overtime on top of basic salary. His contract says that for holidays he will only be paid basic pay. That means that for 4 weeks of the holiday, he has been underpaid. For 1.6 weeks he has not been underpaid. As a general rule, unless it is agreed otherwise it is the first 4 weeks that are considered euroleave. Accordingly, the underpaid euroleave would be separated by UK leave paid at a lawful rate. So the UK leave would break the series and limit the employer’s losses. And in any event, the claim could certainly only go back 2 years.
If you require further advice on these issues, you may wish to join our community; on elXtr we have guides and documents to help you navigate employment issues.
If you have access to the legal helpline and want to discuss your specific circumstances with a qualified solicitor or barrister, please get in touch with them.