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Europe paves the way for more holiday pay claims?

employmentlaw@work / 30 November 2017

In an important decision, the European Court of Justice (“ECJ”) has held that a self-employed salesman, who was actually a worker, is entitled to unpaid holiday pay reaching back over a number of years.

ISSUE:

Mr King worked as a self-employed salesman for The Sash Window Workshop Ltd (“SWW”) from 1999 to 2012.

Due to his self-employed status, he was not paid for holidays.  After retiring, Mr King brought a claim for (amongst other things) unpaid holiday pay under the Working Time Regulations (“WTR”).  His holiday pay claim was made up of three parts: (a) holiday accrued but untaken up to the termination date in the current holiday year; (b) holiday requested and taken in previous years; and (c) holiday accrued but untaken in previous years.  Mr King argued that he had not taken his full holiday entitlement each year because it would have been unpaid.

The Employment Tribunal declared that Mr King was not self-employed and was, in fact, a worker entitled to all three elements of holiday pay claimed stretching back to 1999.  SWW appealed against the Tribunal’s decision.  The case went to the Court of Appeal, by which time it was accepted that Mr King was a worker.  Further, the only element of holiday pay which remained in dispute was that relating to holiday accrued but untaken in previous years.  SWW argued that Mr King was not entitled to be paid for this as he had not taken holiday in the relevant year and the WTR prevents the carry-over of untaken holiday to subsequent years.

The Court of Appeal referred certain questions to the ECJ.  The ECJ has now held that:

  • Mr King was entitled indefinitely to carry forward accrued holiday under the Working Time Directive (“WTD”) (from which WTR rights are derived) where his employer refused to allow him to take paid holiday.  He was therefore entitled to be paid in lieu of all his accrued holiday on termination.
  • Mr King did not have to take unpaid holiday first in order to establish this right.
  • Granting a worker unpaid holiday, but requiring them to take that holiday without pay before he or she can bring a claim for paid holiday, is incompatible with the WTD.

A distinction was drawn between Mr King’s case and cases of accrued holiday entitlement due to sickness absence (where carry over may be limited): the ECJ found that where an employer benefits from not allowing a worker to take holiday, it must bear the consequences.

As in previous EU cases relating to holiday pay and carry over, this decision will only apply to the 20 days’ holiday entitlement under EU law.

KEY DATES:

The ECJ’s decision was released on 29 November 2017.

IMPACT:

The Court of Appeal will now hearMr King’s case and will need to consider the WTR in light of the ECJ’s decision.

This case is likely to have significant implications for employers of gig economy workers whose status, following recent case law (which we have reported here and here) may in fact be “worker” rather than “self-employed”.  If their “worker” status is established, they may now be able to claim back pay in respect of unpaid annual holiday going back many years.

ACTION:

It is likely that issues relating to both holiday pay and employment status will continue to dominate employment law news over the coming months.  It is also likely that we will see more claims for holiday pay as a result of this case.

Employers should be aware of the issues arising here, particularly if they operate in a gig economy or with a large number of “self-employed” individuals.  Once again, this case stresses the importance of adopting the correct contractual status for workers.

We will keep you updated with further developments.

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