Employment Law Cases

Three-month rule on backdated holiday pay survives legal challenge

Fulton v Bear Scotland Ltd No. 2

The three-month rule which means that workers will lose the right to claim back pay for underpaid holidays where there has been three months or more between underpayments has been upheld on appeal.

This appeal has its origin in a 2014 decision where the EAT held that non-guaranteed overtime must be taken into account when calculating holiday pay. However, it also held that for the purposes of bringing an unlawful deduction from wages claim, a gap of more than three months between any two deductions in the chain breaks a ‘series’ of deductions. A claim can only be made outside this time limit if it was not ‘reasonably practicable’ to bring the claim in time. The case returned to the tribunal which, unsurprisingly, held that it was bound by the EAT’s decision. The government subsequently amended the law to limit claims to two years’ back pay.

Mr Fulton however decided to challenge the original EAT decision. His grounds for doing so were pretty technical. Suffice it to say that a different Scottish EAT judge had no difficulty rejecting his claim. The original EAT decision was binding precedent and the EAT could not, and would not, depart from it. The EAT can only depart from a decision of a differently constituted EAT in certain exceptional circumstances, none of which applied in this case.

Link to judgement: http://www.bailii.org/uk/cases/UKEAT/2016/0010_16_0912.html


Employers will no doubt breathe a sigh of relief. This should be the last instalment of this long-running saga. Many claims for historical underpayment of holiday pay will continue to be found out of time. The claimants could try to appeal to the Court of Appeal but it’s unlikely they’ll be able to do so. However, given the sheer volume of holiday litigation, it’s not inconceivable that the Court of Appeal will consider this issue in the future.

What we have now is certainty in relation to what holidays can be claimed but continuing uncertainty as to how holiday pay itself should be calculated. This should be forthcoming when the employment tribunal’s decision is given in British Gas v Lock.