Could the two-year ‘backstop’ on unlawful wage deduction claims be removed?

Since 1 July 2015, there has been a two-year ‘backstop’ for most unlawful deductions from wages claims, limiting the amounts that can be recovered by workers when bringing claims for unpaid wages.

The recent employment tribunal case of Afshar and others v Addison Lee Limited brings into question the lawfulness of this limitation.

Background

Under the Deduction from Wages (Limitation) Regulations 2014 (the Regulations), an employment tribunal cannot go back more than two years before the date of the claim when determining an unlawful deduction from wages claim. The Regulations were introduced to limit the burden on employers of backdated holiday pay claims.

With some limited exceptions, the Regulations apply to all wages claims including claims for any fee, bonus, commission, holiday pay etc.

This means that there is a limit on the amount that a worker can recover when making a claim covered by the Regulations.

When the Regulations were introduced, there was initial speculation that they could be ‘ultra vires’, meaning that their introduction went beyond legal authority. However, until now, there has been no successful challenge.

Afshar and others v Addison Lee Limited

The claimants were drivers working for Addison Lee. The employment tribunal found they were workers and could therefore bring claims for non-payment of the national minimum wage and holiday pay.

When the Regulations were introduced, EU-rights had to be no more difficult to enforce then equivalent domestic rights (known as ‘the principle of equivalence’). As a result of this, the government applied the Regulations to all wages claims, not just those related to EU-derived holiday pay.

The tribunal recognised that the government had the power to make regulations imposing a time limit on the enforcement of the EU-derived right to holiday pay. However, it was not within the scope of that power to try and avoid a breach of the principle of equivalence by also imposing that time limit on domestic rights. The tribunal held that a change such as this would have required new primary legislation.

Comment

This decision is not binding on other employment tribunals, however, it is highly likely that Addison Lee will appeal the decision to the Employment Appeal Tribunal. If so, it is one to keep an eye on as it has the potential to greatly increase the liability on employers for holiday pay claims.

For more information about this article or any other aspect of people services reimagined, download our App for Apple or Android, and contact your integrated HR, employment law and health & safety team at AfterAthena today. For new enquiries, book your free consultation with a qualified expert to get started.