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Breaking a series of deductions

Following the landmark decision in 2014 that ‘non-guaranteed’ overtime should be included when calculating a worker’s holiday pay in the case of Fulton and anor v Bear Scotland Ltd, the Employment Appeal Tribunal has confirmed the decision that a three month gap between deductions from wages breaks a series of deductions for the purpose of unlawful deduction from wages claims.

Fulton and anor v Bear Scotland Ltd

The Employment Appeal Tribunal (EAT) has confirmed the decision reached in earlier proceedings in Fulton and anor v Bear Scotland Ltd that a three month gap between non-payment of wages would be sufficient to break a series of deductions for the purpose of claims for unlawful deduction from wages.

The appeal arose out of the long-running dispute over holiday pay. In 2014, the EAT made a landmark decision that ‘non-guaranteed’ overtime should be included when calculating a workers holiday pay, in accordance with Article 7 of the European Working Time Directive and the Working Time Regulations 1998. The then president of the EAT, Mr Justice Langstaff, also found that whenever there is a three month break between deductions, it would be sufficient to break the series of deductions stating that “…a period of any more than three months is generally to be regarded as too long a time to wait before making a claim”.

This made it incredibly difficult for an employee to bring claims going back over a number of years. The case returned to the employment tribunal for a final determination.

The Claimants brought a further appeal, arguing that Mr Justice Langstaff’s comments were not binding – they were intended to create a strong presumption that a three-month gap breaks the series but was not a ‘hard and fast’ rule for every case. In considering the appeal, the EAT disagreed.

The EAT found that Mr Justice Langstaff’s use of the word “generally” was not to be taken out of context and used to conclude that the three month rule is only a presumption. It held that the three month gap ruling was binding precedent.

The EAT set out that deductions pre-dating a three month gap can only be considered if an Employment Tribunal is persuaded to exercise its discretion to extend the time period.

Comment

Whilst unsurprising, the decision that the ‘three month rule’ is binding on tribunals is good news for employers.

Since the original EAT decision, the Government intervened to bring in a 2 year long-stop on unlawful deduction from wages claims, meaning that claimants link deductions over a number of years. This decision makes it difficult for an employee even to go back 2 years, especially in relation to holiday pay, bearing in mind that the requirement to including non-guaranteed overtime in holiday pay only applies to 4 weeks of an employee’s annual entitlement.

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