Earlier this month, the Employment Appeal Tribunal (EAT) published their decision inBear Scotland v Fulton and others (Bear Scotland Ltd v Fulton and another; Hertel (UK) Ltd v Wood and others; Amec Group Ltd v Law and others), following an appeal by Bear Scotland in relation to a decision of the Glasgow Employment Tribunal. The issue at hand was how employers are to calculate holiday pay.

Prior to this decision, holiday pay calculations had only taken into account an employee's basic remuneration. Any overtime worked by an employee, and the additional money earned (for example, from commissions), was not considered when an employer was calculating 'basic' pay to be received by the employee during the four weeks annual leave they are entitled to under EU Law.

The EAT decided that Article 7 of the Working Time Directive (2003/88/EC) required that pay that is "normally received" should be considered when calculating holiday pay. The follows a decision earlier this year in Lock v British Gas Trading, which determined that commission should be included in holiday pay calculations, but only where it was a crucial aspect of an employee's salary.

Whilst this decision has found in favour of the employees, the EAT has placed fairly severe restrictions on those wishing to bring an historic claim for monies not received. In order to successfully bring a claim of this nature, an employee must show a single ongoing series of deductions has been made by the employer. The EAT ruled that where a period of three months has elapsed with no such deduction occurring, the 'series' is broken and, as such, no historic claim can be made. This has drastically reduced the number and value of claims potentially faced by employers. The decision - which will likely be subject of further appeals - is important as it confirms that when calculating holiday pay, employers must include all elements of normal remuneration, such as overtime and commission, or they will be in breach of the Working Time Directive. It is likely employers will now require to amend their terms and conditions to bring them into line with this decision.

Unfortunately, owing to likely impending appeals and uncertainty on potential historic claims, it is not clear where employees can go from here in respect of making claims against their employers. If you feel you have a valid claim for unlawful deduction of wages when your holiday pay has been calculated, you only have three months less one day from the last alleged deduction to lodge your claim.

Before a claim can be made to the Employment Tribunal, it must first be lodged with ACAS for pre-action conciliation. This gives the parties the opportunity of agreeing a settlement.  If this cannot be achieved, the employee will then be able to proceed to the ET. The clock stops as regards the time limit when the case is at pre-action conciliation but starts again once the period for conciliation ends.

If you feel you have a claim regarding an unlawful deduction from wages, please contact a member of our Employment Law team who may be able to assist.