Holiday pay was THE hot topic in employment law for a number of years, until the decision in Bear Scotland largely sorted it out and the employment status of people working in the gig-economy took over with cases like Uber.
Yesterday (29/11/17), everything came together as the Court of Justice of the European Union gave its decision in King v The Sash Window Workshop Ltd, a landmark ruling focused on holiday AND the gig-economy which could have far-reaching consequences!
The case centred on a window salesman, who throughout his relationship with the employer was held out to be self-employed. After termination of his employment, he claimed to be a worker and claimed he should be entitled to 13 years’ worth of holiday he wasn’t allowed to take.
Here we go again…..
King v The Sash Window Workshop Ltd
Mr King worked for The Sash Window Workshop Ltd (SWW) as a self-employed commission-only salesman from 1999 to his termination in 2012. Mr King was offered an employment contract in 2008, which included the right to paid annual leave; however, he opted to remain self-employed without a contract. When SWW terminated the arrangement Mr King brought claims for unpaid holiday pay in the Employment Tribunal. He argued that he was entitled to receive payment as he had been unable to take leave because he was either too busy to take it or because the business did not provide pay for it. Mr King’s claims were successful as the ET accepted that he was a ‘worker’ for the purposes of the Working Time Regulations 1998. The ET awarded him pay in lieu of annual leave accrued over the entirety of his engagement.
The EAT allowed the employer’s appeal against the judgment in December 2014, shortly after the Bear Scotland decision. It held that the ET had failed to make findings that Mr King was prevented from taking his annual leave for reasons beyond his control and therefore the usual position under Regulation 13 stood, such that the entitlement to leave expires at the end of the relevant leave year. Further, the EAT suggested that Mr King had suffered no financial loss, having been paid – it was simply the health and welfare benefits of taking annual leave that he had lost – for which compensation couldn’t/shouldn’t be the wages or pay otherwise due. In this basis, it was not open to the ET to make an award going back over many years as a series of unlawful deductions from wages. In any event, the EAT found that, following Bear Scotland, any 3 month gap would break the series of deductions.
Mr King appealed to the Court of Appeal who referred the matter to the Court of Justice of the European Union (CJEU).
In what appears to be a bombshell decision, the CJEU held that the means of enforcing the right to paid holiday under the Working Time Regulations 1998 is incompatible with the EU Working Time Directive. It did not agree with the logic of the EAT’s analysis, finding that it would require a worker to first take unpaid leave before bringing a claim for the pay. This was incompatible with the fundamental right to an effective remedy.
The CJEU also found that it was irrelevant that SWW mistakenly believed Mr King to be self-employed. SWW had benefited from Mr King not taking his annual leave and that “an employer who does not allow a worker to take annual leave must bear the consequences”.
The result of the judgment is that a worker who is not permitted by their employer to take their annual leave (even if the employer wrongly thinks they are self-employed) must be permitted to carry over and accumulate paid annual leave rights until the termination of their engagement. This right can go back to 1996, when the European Working Time Directive was introduced.
This ruling is particularly relevant to businesses who engage a lot of purported ‘self-employed’ individuals. In those cases, the individuals will not take, or be paid for, annual holiday. If there is a risk that the individuals are workers within the slightly wider EU meaning, they could bring a claim for holiday covering the entire length of the relationship on termination.
The other situation the judgment will be relevant is the less common situation of an employer simply not permitting a member of staff to take their holiday.
It should be noted by employers that this only applies to the 4 weeks annual leave that an employee gets from the EU Working Directive, not all of their annual leave allowance.
The Court of Appeal will need to consider the case in light of the CJEU verdict but there doesn’t seem to be much scope for interpretation.
The CJEU found that this case was different to sickness absence, whereby untaken holiday can only accrue and be taken for a limited amount of time.
If you have any queries on holiday pay or employment status, please do not hesitate to contact Joanne Holborn, Tom Scaife or Caroline Rayner on 01228 552600 or 01524 548494.