An employment tribunal recently held that the two-year backstop on unlawful deductions claims was ultra vires and unlawful. If upheld on appeal, this decision would have significant financial implications for employers facing claims for unlawful deduction from wages.
Background
In 2014, the government made regulations that introduced a two-year backstop on claims for unlawful deduction from wages. Regulations are a form of secondary legislation, which is subject to less Parliamentary scrutiny than primary legislation. The government’s intention was to reduce the financial implications of backdated holiday pay claims. To avoid breaching EU law, the legislation covered all claims for unlawful deductions and not just holiday pay claims.
Case facts
The claimants in this case were drivers for private hire firm Addison Lee Ltd. Some of them drove branded vehicles and others, known as partner drivers, used their own vehicle or leased one from a third party. They were all required to log into the company’s platform, Shamrock. The claimants argued that they should be classified as “workers” and therefore entitled to employment rights such as the national minimum wage and holiday pay. The claimants also argued that the two-year backstop on unlawful deduction from wages claims was ultra vires.
Employment tribunal decision
The tribunal had determined that when the claimants were logged into Shamrock, they were classified as workers. However, due to being able to offer services on multiple platforms, partner drivers were only considered workers from the moment they accepted a journey until its completion.
Most significantly, the tribunal held that the two-year limitation period was ultra vires. It found that it was unlawful to impose the time limit on fundamental domestic wage rights without primary legislation.
Implications
As an employment tribunal decision, this judgment will not bind other tribunals. However, it is highly likely that Addison Lee will appeal the decision given its potential impact. If the Employment Appeal Tribunal, or higher appeal courts, were to uphold the tribunal’s decision, it would have a significant impact on historical holiday pay claims, of which there are still many outstanding. It would also be relevant in claims about worker status and consequent entitlement to national minimum wage and holiday pay. Even if the parties settle this particular dispute, the tribunal’s decision in this case is likely to encourage claimants in other cases to attack the lawfulness of the 2014 regulations.
Absent the two-year backstop, it is not certain how far back claims could stretch. The explanatory notes to the 2014 regulations indicated it was conceivable claims could go back as far as 1998, when the Working Time Regulations first came into force. The government might decide to address the issue through primary legislation, but we are not likely to know if it will do so until a decision from an appeal court, possibly even the Supreme Court.
For now, we must wait and see if this case reaches the Employment Appeal Tribunal (or beyond). In the meantime, businesses with outstanding claims about holiday pay or worker status may wish to assess the possible financial implications if the two-year backstop were removed.
