Tribunal holds two-year backstop on unlawful deductions claims is unlawful
In what is considered to be the first judicial decision on this topic, on 7 January 2025, the Tribunal held, in the case of Afshar and Others v Addison Lee Limited, that the two-year backstop on unlawful deduction claims is unlawful. The reasoning behind the Tribunal’s decision was that it found that the regulations which introduced the two-year backstop under the Employment Rights Act 1996 went beyond the legal powers conferred by the European Communities Act 1972.
This now means that claims for unlawful deductions can potentially go back further than two years.
As a result of this decision, there are several steps employers should now consider taking:
- Review Historical Pay Records: Employers should consider reviewing their historical pay records to identify any potential unlawful deductions that may have occurred beyond the two-year period and take steps to rectify and address these deductions.
- Update Policies and Procedures: Employers should update their policies and procedures to ensure compliance with the Tribunal’s ruling. This includes revising any internal guidelines that previously relied on the two-year backstop for unlawful deduction claims.
- Conduct Regular Audits: Employers should implement regular audits of payroll and employment practices to ensure that all deductions are lawful and properly documented and to identify and resolve issues before they escalate into legal claims.
If you need any assistance with reviewing historical pay records, updating policies and procedures or dealing with any complaints relating to unlawful deductions, please get in touch with a member of the team.