ADVICE: Backdated overtime claims

Given the significance of the judgment to the three businesses concerned with the original appeals and all organisations in general, it seems highly likely the matter will be appealed to the Court of Appeal. This would almost certainly ensure a final decision on the matter could still be many years away.

Wait or act?

But for those organisations considering the possible consequences, there are actions that could help them mitigate the risks:

• Employers should assess their potential liability for historical claims and ensure they budget for this in worst-case scenario;
• Employers could settle claims with employees. This will depend on the number of staff involved and will take time to calculate if the settlements are to reflect each employee’s entitlement;
• Employers could make a notional overtime payment to staff to break the series of deductions, which could trigger the three-month time limit for making a claim for historical underpayments. However, it could arouse suspicion and lead to more claims, particularly in unionised workplaces;
• Employers may also wish to impose a suspension on holiday for three months. This could lead to discontent in the workforce and also unmanageable holiday levels in other parts of the year;
• A more drastic option would be for employers to cease offering overtime to workers.  However, this would not prevent retrospective claims and is likely to have disadvantages for employees and ultimately, the business;
• In the future, subject to the outcome of any appeal, employers should change their policies to include overtime in holiday pay calculations. This will put an end to the series of deductions with regard to unlawful deduction of wages, so employees would have to make a claim within three months of the last deduction, otherwise they will lose the ability to do so. However, employers may need to consult with trade unions first.

In conclusion

Despite all the speculation, until we know whether the ruling is going to be appealed, the position remains unclear. I’m confident most employers will choose to wait for the result and see what happens, with many considering that any changes they make now will be insufficient or unnecessary.