In 2015, the Deduction from Wages (Limitation) Regulations 2014 ("the Regulations") came into force with a view, primarily, to limit the burden on businesses in relation to backdated holiday pay claims. The effect of the Regulations was to limit the period of time an employment tribunal could consider when making an award for unlawful deduction of wages to two years prior to the date that the claim was presented to that tribunal. The Regulations have particularly impacted employment status claims, where supposed self-employed individuals are found to be workers and therefore eligible for additional rights such as holiday pay.
Right from the point of implementation it was suggested that the Regulations might be ultra vires. This is a technical argument relating to the manner in which the Regulations were introduced (under the European Communities Act 1972 ("ECA") which allows the UK Government to implement secondary legislation for the purpose of ensuring compliance with EU obligations) and the EU principle of equivalence that requires rights arising from EU law not being more difficult to enforce than the equivalent domestic right. The case of Afshar & Others v Addison Lee Limited ("Afshar") was the first known case to directly address this point.
The case
Afshar was ostensibly a case about the employment status of Addison Lee drivers - whether they were workers for the purposes of holiday pay and national minimum wage. The employment tribunal found most of the claimants (this was a test case with eight claimants) were workers and therefore could bring these claims.
As regards the question of the Regulations being ultra vires, it was concluded that they were. Parliament had relied on the ECA for authority to impose the two-year limit on claims, but in order not to breach the EU principle of equivalence (EU derived rights cannot be more difficult to enforce than equivalent domestic rights) the Regulations were applied not only to holiday pay claims (which are EU derived) but to all wage claims. Breach of the principle of equivalence could not be avoided in that manner. In the view of the Employment Judge, Parliament did not anticipate that the ECA could lawfully limit the exercise of a UK statutory right that was not derived from EU law, and the Regulations were therefore unlawful.
The impact
First and foremost, it is worth pointing out that this is a judgment of the employment tribunal and therefore does not bind any other tribunal. Secondly, immediately following the conclusion that the limitation was ultra vires the Judge states "I accept that my conclusion in that regard will be challenged and may be wrong". He is likely correct that it will be challenged and that an appeal will be made on this point to the Employment Appeal Tribunal.
It would also be open to the UK Government to introduce primary legislation that could lawfully impose the two-year limit if it were felt necessary. That said, the thinking of the current Labour Government might not align with that of the Conservative Government of 2014 that introduced the two-year limit.
