The recent Employment Appeal Tribunal (“EAT”) judgment of Deksne v Ambitions Ltd [2024] applied the legal principle that a gap of three months between underpayments is immaterial when considering whether a claim of unlawful deduction of wages falls within the jurisdiction of the tribunal.
In 2022, the tribunal in Deksne v Ambitions Ltd [2022] had applied the decision in Bear Scotland v Fulton [2014], which held that the link between a series of underpaid holiday pay was broken if over three months had passed between the deductions. Any underpayments caught by this were therefore out of time.
However, the Bear Scotland decision was overturned by the Supreme Court in Chief Constable of the Police Service of Northern Ireland v Agnew [2023]. It was held in Agnew that establishing a “series” of underpayments required consideration of all relevant circumstances, including:
- The similarities and differences between the underpayments
- The frequency, size and impact of the deductions
- How the deductions came to be made and applied
- What linked the underpayments together
It should be noted that the two-year backstop for claims of unlawful deduction of wages still applies.
All workers are entitled to holiday pay and research indicates that millions across the UK are missing out on this entitlement. The government is seeking to create a ‘Fair Work Agency’ with the view to taking “tough action” against employers failing to comply with regulations, including by conferring powers to investigate employers and issue civil penalties.
As employers are unable to rely on gaps between underpayments to prevent the tribunal from establishing a “series” of deductions, caution should be applied when calculating holiday pay. In Deksne, a series was established by the underpayments of holiday pay being based on the same calculation. In Agnew, the deductions were linked by them being calculated by reference to basic pay rather than normal pay.
