Glenn Hayes, an employment law Partner at national law firm Irwin Mitchell, said:”There was considerable concern that today’s decision could lead to thousands of claims for backdated holiday pay, possibly going back 16 years. 

This looks to be unlikely because the Employment Appeal Tribunal (EAT) appears to have shut down the argument that employees could back date claims on the basis that they had suffered a series of deductions from their wages when taking holiday albeit there remains some uncertainty as to what denotes a ‘series’ and how this can be broken. “Basically, it appears that if there is a gap of more than three months in any alleged series of deductions, the EAT  loses jurisdiction to hear claims for the earlier deductions.  It appears as though the Appeal Tribunal has accepted that including overtime in the holiday pay calculation only relates to 20 days holiday required under the Working Time Directive and not to the additional eight days provided under UK law. This means that employees who took their full entitlement could not claim that they suffered an unbroken series of deductions.

“What the judgment it doesn't answer however is whether an individual can bring a claim for breach of contract, and it is likely that this point will be litigated as potentially employees have six years to pursue a civil claim.  It also does not answer how the payments should properly be calculated, for example, whether it should be over a reference period of the previous 12 weeks prior to the overtime being taken such as in the UK, or over the previous 12 months, an approach suggested by the Advocate General in the Lock vs British Gas commission case. The Court decided that this was a matter for Parliament to determine rather than the Courts.

 “Notwithstanding that, these rulings represent a major blow to some UK companies and could cast a huge shadow over the wider economy. If that wasn’t bad enough news for business, it is widely anticipated that employers will also have to include commission payments in holiday pay calculations after a similar case (Lock) is decided in February 2015.“Affected businesses now face the very real prospect of having to fund enhanced payments to staff – even though they have operated within UK law for many years. We expect that many businesses will have to withdraw overtime arrangements, may force people to take holiday after times when overtime has not been worked, and restructure their pay arrangements. The uncertainty in terms of what might be around the corner is likely to see some companies holding back from making pay rises to staff which will have a  knock-on impact on talent retention.”