Lawyers Say Employers Will Welcome Latest Ruling

The Employment Appeals Tribunal (EAT) has confirmed that in the overtime case of Bear Scotland v Fulton and Baxter, a gap of more than three months between non-payments or underpayments of wages will break the ‘series’ of deductions for the purpose of bringing an unlawful deduction from wages claim.

Facts

The long-running case focuses on Mr Baxter and Mr Fulton who were employed by Bear Scotland as road operatives. They received basic pay plus overtime and standby payments for their work; however they were only paid basic pay when they took a holiday. As a result, they each issued eight separate claims alleging that they had been underpaid holiday in each holiday year. 

• Mr Baxter claimed that he had been underpaid holiday from 2007 until 2014 and that this amounted to £15,170.
• Mr Fulton claimed that he had been underpaid holiday from 2008 until 2014 and that this amounted to £10,060.

The EAT in a separate case of Wood and others v Hertel determined that workers who were required to work overtime when it was offered were entitled to have these payments and other relevant allowances included in the first 20 days of paid holiday taken in each holiday year.  Mr Baxter and Mr Fulton’s claims were remitted back to the Tribunal because the overtime arrangements at Bear Scotland provided that workers could turn down overtime requests, but only in limited circumstances.

Arguments were not raised however about whether the slightly different overtime rules operated by Bear Scotland could be distinguished from those in Wood, but instead the parties reached agreement on the relevant facts and appear to have accepted that the overtime pay and stand by allowances received by Mr Baxter and Mr Fulton should have been included in their holiday pay.

Instead, the arguments focused on the new rule imposed by the EAT in Wood, that if more than three months had elapsed between successive non or underpayments of the first 20 days of leave, this would break the link and workers would not be able to claim the underpayments as part of a series of deductions.

The Claimants’ tried to convince the Tribunal that it was not bound by this decision and that they could be reimbursed for all of their underpaid holiday.

The Tribunal rejected this argument and said it was bound by the EAT’s decision on this point and this meant that the majority of the Claimant’s claims were out of time.

The Tribunal acknowledged that the Claimants’ had suffered significant losses and that this resulted in a ‘windfall’ for their employer. Mr Baxter received only £2,180 of the £15,170 he had been underpaid and Mr Fulton received only £2,153 of the £10,060 he had been underpaid.

The claimants lodged an appeal against this decision and attempted to challenge the requirement that deductions will not form part of a series if three months has elapsed between payments.

This appeal has however now been rejected.

Expert Opinion

“Employers will welcome this decision because it provides them with powerful ammunition to defeat holiday pay claims which go further back than a worker’s current holiday year. Put simply, a worker will only be able to link underpayments of holiday if there are no gaps of three months or more between underpayments and the payments themselves are of the same ‘type’. The first 20 days of holiday are treated differently from the remaining 8 statutory days.

“Whilst this is effectively the end of the road for Mr Fulton and Mr Baxter, it does not mean that the argument about this issue will not resurface in another case. Back in 2014, the EAT in its original decision on Wood and others v Hertel and Fulton and Bear Scotland Limited, recognised that its interpretation in respect of limiting a series of deductions was a new one and should be considered by a higher court. Fulton and Baxter were parties to that litigation and did not appeal and the EAT made it clear that they had missed their chance and could not try and re-open the issue through separate litigation.”
Glenn Hayes - Partner & National Head of Employment Law

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