“Self-employed” worker entitled to 13 years’ holiday pay
The European Court of Justice has ruled that a worker who did not take holiday because his employer would not pay him for it could claim holiday pay going back 13 years.
The European Court of Justice has ruled that a worker who did not take holiday because his employer would not pay him for it could claim holiday pay going back 13 years. The Court saw no reason to limit carry over of untaken holiday in the same way as in sickness cases. It considered that it is up to the employer to inform itself of its obligations and an employer that does not allow a worker to exercise the right to paid annual leave must bear the consequences. On this basis, the worker was able to carry over all of the leave which he had not taken and to be paid in lieu on termination.
In Conley King v The Sash Window Workshop Ltd, Mr King worked as a salesman on the basis of a ‘self-employed commission only contract’ from 1999 until he retired in 2012. His contract was silent on the issue of paid annual leave. When he took annual leave, it was unpaid.
After leaving the company, Mr King sought to recover payment for his annual leave - taken and unpaid, as well as untaken - for the entire period of his engagement. Sash Window Workshop Ltd (SWWL) refused on the basis that Mr King was self-employed and therefore not entitled to holiday pay. Mr King brought a claim in the Employment Tribunal.
The Employment Tribunal found that Mr King was a ‘worker’ within the meaning of the UK legislation rather than a self-employed contractor. As such, the Tribunal upheld his claims. It awarded him holiday pay which included pay in lieu of annual leave accrued but not taken during previous years, claimed as a series of deductions. It considered that the position is similar to cases where a worker is unable to take leave during the leave year in which it accrues due to sickness. In such cases, the worker is entitled to carry the leave over and to be paid in lieu of any untaken leave on termination.
SWWL appealed to the Employment Appeal Tribunal (EAT) arguing that Mr King was not entitled to carry over periods of untaken annual leave and so any untaken entitlement was lost when the new holiday year began. The EAT allowed the appeal, holding that no finding of fact had been made that Mr King was prevented from taking his annual leave for reasons beyond his control and there was no reason to depart from the usual position that the entitlement to leave expires at the end of the relevant leave year.
Mr King appealed to the Court of Appeal and the case was referred to the European Court of Justice (ECJ).
The ECJ noted that a worker faced with uncertainty over whether leave will be paid may not get the full benefit of that leave (in terms of relaxation and leisure) and may be deterred from taking leave in the first place. It considered that the effect of the EAT’s judgment was that a worker must take leave before being able to claim payment for it. This was incompatible with the Working Time Directive. It would mean that in Mr King’s case he would be unable to claim after the termination of his employment in respect of paid leave due but not taken. This would deprive him of an effective remedy.
With regard to carrying over untaken leave, the ECJ noted that in the case of a worker who is prevented from taking paid annual leave due to sickness, case law permits a limit on the worker’s right to carry over untaken leave. (In the UK, any untaken leave has to be taken within 18 months of the end of the leave year in question leave, otherwise it is lost). The rationale for this has been to balance the protection of workers against the organisational difficulties that employers may face as a result of long periods of absence. However, there was no need to protect the employer’s interests in the present case. Indeed, the employer benefited from Mr King not taking paid holiday during his engagement. It is up to an employer to inform itself of its obligations and an employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences. On this basis, the ECJ ruled that Mr King was able to carry over all of the leave which he had not taken because he would not be paid for it and to be paid in lieu on termination.
This case has significant implications, particularly for employers of so-called ‘gig economy’ workers if their employment status is judged to be that of a worker rather than self-employed.
On termination, those with worker status who have not taken holiday because they were led to believe it would not be paid will be able to claim pay in lieu of untaken holiday for the whole period of the contract. The decision only applies to the basic four week statutory holiday entitlement under the Working Time Regulations 1998.
Where an individual has taken leave but not been paid for it (or has not been paid in full, for example because commission or overtime was not included ), the unlawful deduction from wages regime will apply with its usual limitations, including a two year limit on claiming back pay. However, it is possible that those limitations may now also be subject to challenge as not providing an effective remedy for holiday pay breaches.
Even if an employer starts paying holiday pay going forward, they could remain liable for prior breaches.
This case is a reminder to employers to carefully consider the status of the individuals that work for them and their associated rights and to be wary of relying simply on what the individual’s contract says.
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