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Holiday pay latest: three month rule survives challenge

  • United Kingdom
  • Employment law


In the latest development in the long running holiday pay litigation against Bear Scotland Ltd, the Employment Appeal Tribunal has refused to overturn the ‘three month rule’ that means workers will usually lose the right to claim back pay for underpaid holidays where there is a period of three months or more between underpayments.

The three month rule was identified by the Employment Appeal Tribunal (EAT) in 2014 when the case of Fulton v Bear Scotland was first appealed. The legislation says workers who want to make a claim under the Employment Rights Act for underpaid wages (including holiday pay) must do so within three months of the underpayment or, if there is a series of underpayments, then within three months of the latest underpayment. A claim can only be made outside this time limit if it was not reasonably practicable to bring the claim in time. In recent years many workers have brought claims alleging they have been underpaid holiday pay over several years. Until the three month rule was identified, claimants were able to argue that any holiday underpayments were part of the same series and that they were, therefore, entitled to claim arrears dating back, in some cases, to 1998 (this being before the government stepped in to limit arrears claims to two years by changing the legislation). The 2014 ruling in the Bear Scotland case, however, severely restricted the scope for back-pay claims spanning long periods.

In the latest ruling, a different EAT judge was invited to overturn, or at least water down, the three month rule. She refused to do either. On the question of overturning the earlier ruling, the EAT said this was not possible because the claimants could have appealed it at the time but didn’t and, in any event, the EAT can only depart from a decision of a differently constituted EAT in certain exceptional circumstances, none of which applied in this case. The claimants’ other argument was that the earlier decision did not lay down a hard and fast rule that underpayments will never form part of the same series if there is a gap of three months between them but simply established a presumption, rebuttable on the facts, that such underpayments were not in the same series. This argument, too, was rejected, the EAT deciding that it is a firm rule that applies in every case.

Bear Scotland could try to appeal to the Court of Session in Scotland but the fact that it did not appeal the EAT’s 2014 ruling at the time will limit its prospects of success. It is likely, however, that sooner or later the three month rule will be considered by the Court of Appeal or the Court of Session in another case and at that point its future will be in jeopardy. For now, though, the three month rule survives and employment tribunals are bound to apply it in the cases they deal with, to the advantage, and no doubt relief, of many employers, especially those facing claims brought before 1 July 2015 when the two year back-stop on arrears took effect.

Fulton v Bear Scotland Ltd (No 2), EAT, 11 May 2017:


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