Government announces Regulations to limit holiday pay claims
13th January 2015
The Government is now introducing legislation to put a time limit on back-dated claims for overtime in holiday pay.
In November, we told you about the implications of a ruling on claims for overtime in holiday pay.
Here, Jamie Gamble from our employment team outlines what the latest move from the Government means for you. To discuss the issues raised, please get in touch with Martin Hulls or contact Jamie Gamble.
What is happening?
On 18 December 2014, the Government laid before Parliament The Deduction from Wages (Limitation) Regulations 2014 (the “Draft Regulations”).
The Regulations aim to amend the Employment Rights Act 1996 and place a two-year limitation of claims brought by employees for unlawful deductions from wages. This means that claims for holiday pay cannot stretch back more than two years.
When do the Regulations take effect?
The Draft Regulations came into force on 8 January 2015, but they will only apply to claims presented to the Employment Tribunal on or after 1 July 2015.
Employees therefore have six months in which to bring a claim against employers without a time limit on how far back the claim can go.
The Draft Regulations will also amend the Working Time Regulations 1998 by clarifying that a right to holiday pay is a statutory right and not a right under a worker’s contract.
How will the Regulations change the situation?
The Draft Regulations will protect UK businesses from potentially large claims for backdated holiday pay from 1 July 2015.
How will this affect corporate transactions?
Whilst the Draft Regulations will limit overtime claims for holiday pay from 1 July 2015, there remains the potential for employees to put in claims against employers without a time limit before that date.
If your clients are involved in ongoing and upcoming acquisitions then buyers should do further due diligence on payments made to employees that are in addition to basic pay to assess potentially historical employee costs.
Buyers should also seek indemnities in respect of historical liability and warranties in respect of the accuracy of the information provided about the different components of pay and should consider if retentions are required in the event that liabilities crystallise.
How can Ward Hadaway help?
For further guidance on this important issue and how it could affect your business, please get in touch with Jamie Gamble in our Employment Team or your usual Ward Hadaway contact.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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