Summary and implications

The Employment Appeal Tribunal has handed down judgment this morning in the test case of Fulton v Bear Scotland Limited [2014].

The EAT found:

Where an employee is required to work overtime these payments should be included in an employer’s calculations of holiday pay; and
An employee’s claim for unpaid holiday pay under the ‘unlawful deductions from wages’ legislation is time limited. If more than three months has elapsed between each “deduction” (i.e. between each occasion that holiday pay was paid at a lower rate than it should have been paid) the claim will be out of time.
Comment: The decision will have serious implications for employers across the UK, who may now be liable for millions of pounds in holiday pay. In practice, many claims for unlawful deductions from wages will be out of time and therefore will not be able to proceed in an Employment Tribunal.

Employees who regularly work overtime are most likely to be affected by the decision. Employers who recognise Trade Unions are more likely to face claims for unpaid holiday.

The EAT has granted leave for the decision to be appealed to the Court of Appeal. BIS is setting up a taskforce to assess the impact of the ruling on employers.

We are awaiting the tribunal’s decision on commission payments – watch this space for further news.

Read the full judgment here