New regulations limit claims

New regulations have been rushed through by the government to limit a worker’s basic right to recover their unpaid wages. These are the Deduction from Wages (Limitation) Regulations 2014.

The regulations are supposed to be a response to the EAT ruling secured by the Unite union in late 2014 which confirmed that holiday pay must include overtime. This was the case of Bear Scotland. (see Labour Research, December 2014, page 19).

At the time of the ruling, there was considerable scaremongering among employers who feared large backdated claims.

In practice there was never a real risk of this. In particular, the ruling only permits claims for unpaid holiday taken during the three months dating immediately before any claim.

Unite spelled out its intention not to challenge this aspect of the ruling, explaining that its objective had never been to bankrupt employers with large claims, but instead to focus on ensuring a change in employer practices moving forward.

Nevertheless, the government pandered to employer fears by immediately setting up a taskforce without union involvement to examine ways of “limiting the impact” of the ruling (see Labour Research, December 2014, page 19). These hastily enacted and legally dubious regulations are the result of that taskforce.

The regulations limit claims for a series of deductions from wages to two years (instead of the previous six), ending with the date the claim is presented. But the effect of the regulations goes far beyond the claims for holiday pay that were the subject of the Bear Scotland ruling.

Instead, they cover nearly every kind of wage claim, defined as “any fee, bonus, commission, holiday pay or other emolument referable to [the] employment”.

In other words, as a result of this change to the law, virtually all tribunal claims for unpaid wages are to be limited to two years of back pay.

The only exceptions will be statutory claims such as statutory maternity pay, statutory sick pay and statutory guarantee payments.

Importantly, the change only affects claims brought on or after 1 July 2015. This means that any member with a significant claim for back pay needs to take steps to issue their claim in the tribunal before this date. Claims that have been issued already are not affected.

Legal experts are already lining up to cast doubt on the legality of this response, highlighting in particular the scope for judicial challenge because the government is acting outside its power.

In summary, governments are not allowed to use regulations to change primary legislation — in this case, the long-standing and uncontroversial right to recover your wages enshrined in the Employment Rights Act. Changing primary legislation is the job of parliament. It also requires proper consultation.

In its annual report published in December 2014, the Better Regulations Executive boasts of saving £10 billion in “burdensome” regulation. It is, however, hard to imagine a more “burdensome” piece of regulation than a law that bars a worker recovering his or her earned wages.

The Labour Party needs to confirm quickly that, if elected, it will repeal these iniquitous regulations.