Cap on unlawful deductions liability – July 2015

From 1st July 2015, a worker’s ability to make a lengthy back pay claim in relation to most unlawful deduction claims at tribunal. This will put paid to the uncertainty that employers experience in relation to their liability for holiday pay claims.

The change came about because of the Employment Appeal Tribunal’s decision in Bear Scotland v Fulton. The case focussed on whether an element to represent regular overtime payments should be included in a worker’s holiday pay. The EAT found that holiday pay should include an element of regular overtime payments and because of the way that claims can be made regarding holiday pay, the ruling meant that a worker could potentially make a claim for unpaid monies going back to 1998.

The Government envisaged an influx of claims and realised that the EAT’s decision could have damaging effects on employers bank balances. Therefore, it took the measure to limit the potential liability that employers could face and imposed a 2 year cap on pay claims made on or after 1st July 2015. The cap will apply to pay claims for deductions of all kinds, not just holiday pay and will be counted back from the day the claim is made to the tribunal. This has the effect that, even if the worker suffered deductions in the time period falling more than 2 years before a valid claim is made, he/she cannot receive any recompense for it.

Claims for any statutory payments, including statutory maternity pay, medical suspension pay, maternity suspension pay etc are not covered by the 2 year cap.

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Nicola Mullineux

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