Following the swathe of recent case law on holiday pay, a recent case heard by the European Court of Justice has further expanded the position in favour of workers.
In King v Sash Window Workshop Ltd (29 November 2017) a self-employed contractor, who was actually a worker, was held to be entitled to be paid for outstanding holiday pay stretching back over a thirteen year period.
Mr King was a salesman working for the Sash Window Workshop Ltd from 1999 to 2012, on a self-employed basis. He was paid on a commission only basis and received no basic salary, holiday pay or sick pay. Following retirement at the age of 65, Mr King brought claims for age discrimination and unpaid holiday pay. He was ultimately successful in the age discrimination claim and it was not appealed.
In relation to the holiday pay claim, he argued that he had not taken his full annual leave entitlement each year because it would have been unpaid. His claim stemmed from rights under the Working Time Directive which provide that member states must ensure that every worker is entitled to at least four weeks of paid annual leave.
In relation to the carry over of annual leave from one year to another, the Working Time Regulations 1998 provide that a worker's annual leave entitlement must be taken in the leave year in which it is due and cannot be replaced by a payment in lieu except on termination of employment.
Employment Tribunal Decision
The Employment Tribunal held that Mr King was a worker. As such, it awarded him holiday pay in respect of:
1. Leave accrued and untaken in the final year of employment;
2. Leave requested and taken as unpaid in previous years; and
3. All other leave accrued and untaken in previous years of employment.
The third element – leave accrued and untaken in previous years of employment – was appealed up to the Court of Appeal and the point of law referred to the CJEU.
The CJEU ruled that Mr King was entitled indefinitely to carry over his entitlement to paid annual leave in relation to his previous years of employment. A worker who does not take their annual leave entitlement because their employer refuses to pay them for it, has been prevented from exercising their right to paid leave. In such a scenario, the leave is carried over until the worker has the opportunity to exercise that right, or until termination. The CJEU made it clear that an employer “that does not allow a worker to exercise his right to paid annual leave must bear the consequences”.
This case highlights the importance of correctly establishing employment status at the outset of a relationship. Having failed to do so, the employer in this case was exposed to large liabilities extending back over 13 years. Ultimately, this decision is likely to lead to an increase in holiday pay claims from contractors and workers.
If you have any questions or concerns about holiday pay or employment status please get in touch to discuss.