An Employment Tribunal has considered whether or not a claim for pay in lieu of untaken holiday extending back over a number of leave years can be defeated by making a payment restricted to the employee's entitlement in the latest holiday year.

Last year the House of Lords decision in HM Revenue & Customs v Stringer paved the way for workers to claim pay in respect of unpaid holiday which had not been taken owing to sickness absence.  This could potentially be recovered going back a number of years by way of an unauthorised deductions from wages claim where:-

• there has been a series of failures to pay in lieu of the statutory minimum holiday entitlement under the Working Time Regulations over a number of years ("deductions"); and

• the Tribunal claim is brought within three months of the last "deduction". 

In Khan v Martin McColl, Mr Khan's employment transferred under the TUPE Regulations to Martin McColl in 2007.  At the point of transfer he had accrued two weeks' untaken holiday entitlement.  However, shortly after transferring, Mr Khan went off on long-term sick leave and was absent until his employment came to an end in 2009.

On the termination of his employment, he was only paid the holiday entitlement that had accrued since the start of the 2009 holiday year. Mr Khan therefore sought to recover the 2 weeks' leave he had accrued at the point of his transfer to Martin McColl in 2007, as well as a further 4 weeks' leave which had accrued in the course of 2008 by bringing a deduction from wages claim.

The time limit for claims involving a series of deductions is three months from the date of the last deduction. Martin McColl argued that because the holiday that accrued in the 2009 leave year had been paid, the most recent "deduction" (namely, the failure to pay the 2008 entitlement) had occurred well over three months before the claim was brought. Accordingly Mr Khan's claim was out of time.  The Employment Tribunal agreed with this argument  

Impact on employers

• As an Employment Tribunal decision, this case is not binding on other Tribunals and it therefore will not inevitably follow that employers will be able to defeat similar claims in the future by paying out only the latest year's entitlement.

• At present no appeal has been lodged with the EAT, but we will update you in our ebulletin should there be further developments.

• In any event, this decision will have persuasive value in other similar Tribunal cases and so it offers employers a potential loophole to avoid significant liability where they have employees on their books who have been absent over a number of holiday years and have not received holiday pay.

19 August 2010

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