A recent Tribunal decision in Afshar and others v. Addison Lee Ltd found that the two-year backstop on deductions from wages claims, which has been in force for nearly a decade, was void and the Claimants in that case could claim for more than two years of deductions.

By way of very brief background, in 2014 Regulations were made in Great Britain (but not in Northern Ireland) placing a two-year backstop on claims for unlawful deductions from wages. This meant that, from July 1, 2015, claimants could only claim for deductions dating back for up to two years from the date of their claim. This meant that in almost all cases, even if the deductions stretched back beyond that two-year threshold, liability was capped.

This change was made to limit the risks of employers’ facing big liabilities for unpaid or underpaid holiday pay, following a series of court decisions that expanded those liabilities. However, the Regulations applied to all claims for unlawful deductions from wages, not just holiday pay claims.

A recent decision of the Employment Tribunal decided that these Regulations were ultra vires (meaning, if your Latin is a little rusty, that they were broader than the Government’s legal power to make them) and so were void as if they had never been made (void ab initio, if you want some more Latin). This means that, in that case, the Claimants could claim for underpaid holiday pay stretching beyond two years.

This is a potentially significant development for employers in the UK that could significantly expand liability for holiday pay and other types of deductions from wages claims.

However, while the implications of this decision are potentially significant, there is a good possibility that the two-year backstop on claims could be reinstated and there will be no long-term implications for employers.

• This is only a decision of the Employment Tribunal, so is not binding on other courts and tribunals. Another Tribunal judge could, in theory, come to a different decision on similar facts.
• We understand that the decision is being appealed to the Employment Appeal tribunal and the Government has indicated it will intervene in the appeal to argue in favour of the two-year backstop on claims. An appeal could overturn this Tribunal decision.
• The Government could also choose to renew the two-year backstop in primary legislation, such as the Employment Rights Bill, which is currently making its way through Parliament, to restore the proper legal status of the rule.

The message for now is to watch this space. The two-year backstop is still law and can be relied on, but there is now a question mark over its validity. There are likely to be more developments on this in the future, whether from the Government or from the courts.