A tribunal has ruled that the current two-year backstop on claims for unlawful deductions from wages is unlawful.
Where does this leave underpaid holiday pay claims?
Two-year backstop
In 2015, the Deduction from Wages (Limitation) Regulations 2014 came into force, placing a two-year backstop on most unlawful deductions from wages claims, including those related to deductions from wages owing to an employer’s failure to pay the correct holiday pay.
No legal authority
In Afshar and others v Addison Lee Ltd 2024, the main issue to be decided was whether drivers working for a private hire taxi and courier company had ‘worker’ status for the purpose of various statutory rights. However, the employment tribunal also ruled that the two-year backstop on deductions from wages claims exceeded the law.
Implications
This is a non-binding employment tribunal decision, and it is likely to be appealed. Should it be upheld by a higher court or tribunal, it would mean that holiday pay underpayment claims could go back much further than two years, provided they form part of a series of deductions.
If you are underpaying holiday pay, (for example you do not include regular overtime or commission payments in workers’ pay for at least four weeks of their annual leave) then this ruling could affect you. Historic holiday pay claims could potentially date back to 1998, when the Working Time Regulations 1998 came into force, or at least for six years. Consider making financial provision now.
