An employee has requested backdated holiday pay as he feels that we have calculated his holiday pay incorrectly. What criteria do employees have to meet to claim backdated holiday pay and does the three month rule apply?

Claims for underpayment of holiday pay are most commonly brought as an unlawful deductions from wages claim (Section 13 Employment Rights Act 1996 (ERA 1996)). A claim for unlawful deductions from wages can be brought in relation to a 'one off' failure to pay holiday pay or an ongoing failure to pay holiday pay amounting to a 'series of deductions'. The period within which a claim for unlawful deductions can be brought is three months from the deduction (Section 23(2) ERA 1996) or three months from the last in a series of deductions.

The Deductions from Wages (Limitation) Regulations 2014 (SI 2014/3322) introduced a two-year backstop on the period over which a worker can claim a series of unlawful deductions from wages.

In Bear Scotland v Fulton [2015] IRLR 15, the Employment Appeal Tribunal held that a gap of more than three months between underpayments effectively breaks the series of deductions, meaning that the employee cannot claim for deductions before the three month gap. However, in Chief Constable of the Police Service of Northern Ireland and another v Agnew [2019] IRLR 782, the Northern Irish Court of Appeal held that a gap of more than three months did not necessarily limit the back payment claims. That case does not stand as direct authority in cases in England and Wales, but in obiter comments, Lady Justice Simler in the Court of Appeal in Smith v Pimlico Plumbers [2022] IRLR 347, gave a 'strong provisional view' that Agnew is correct in its interpretation of a series of unlawful deductions from wages.

The position of what amounts to a 'series of deductions' therefore remains unclear; however, Agnew is due to be heard in the Supreme Court in December 2022 and the issue of what amounts to a series of unlawful deductions is likely to be dealt with then.

In Conclusion.

Whilst there is some uncertainty around time limits pending the outcome of the Agnew Supreme Court hearing in December 2022, it would appear that there is some consensus in legal circles that if there is a gap of more than 3 months in the series of deductions then it does not necessarily limit any back payment claims.

Please note that this advice is general in nature. As an RMI member you have access to the RMI Legal advice line, as well as a number of industry experts for your assistance. Should you find yourself in the situation above, contact us at any stage for advice and assistance as appropriate.

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