A conclusion has been reached in the lengthy Pimlico Plumbers holiday pay case, which has implications for the gig economy and any businesses who have “self-employed” contractors who may actually be workers.
The Supreme Court has found that a former Pimlico worker is entitled to back-dated holiday pay of £74,000.
Mr Smith worked for Pimlico Plumbers between 2005 and 2011 as a self-employed heating engineer. He brought claims for unpaid holiday pay, arguing that he was a worker and relied on a similar case of King v Sash Windows which said that if a worker is prevented from taking paid holiday by their employer, they are entitled to carry it over without limit, and to a payment in respect of such leave on termination.
Mr Smith was ultimately classed as a worker by the Supreme Court. When his holiday pay claim went back to the tribunal for determination after the Supreme Court’s decision on his employment status, the claim was dismissed by the tribunal and the Employment Appeal Tribunal for being out of time. We previously reported on those decisions here and here. The Supreme Court has overturned this decision as Mr Smith did not have “the opportunity to exercise the right [of paid leave] conferred by the Working Time Directive”. The judgment explained that a worker can only lose the right to take leave at the end of the leave year if an employer can show that:
- it specifically and transparently gave the worker the opportunity to take paid annual leave;
- encouraged the worker to take paid annual leave; and
- informed the worker that the right would be lost at the end of the leave year.
This potentially means that any worker, regardless of status, has the right to paid holiday and that the burden is on the employer to make them aware of this.
As the entitlement to such accrued leave carries over indefinitely (based on this judgment), it doesn’t crystalise until termination, at which it all becomes payable as accrued but untaken leave. The only limitations are that any claim is subject to the usual time limit of 3 months and limited to 4 weeks annual leave per year.
This decision could have a significant financial impact on businesses who wrongly engage with workers as self-employed. It means that, if classified incorrectly and therefore prevented from taking paid holiday, the holiday pay entitlement accumulates until termination of the employment contract.
It reinforces the need for businesses to classify employees, workers and the self-employed correctly.
We will be covering holiday pay and exploring the potential impact of this case further at our upcoming employment seminars this March. Details can be found here.
If you have any queries in relation to employment status, holiday pay or any other HR queries, please contact our employment team on 01228 552600 or 01524 548494.