In 2017, we reported on the decision in King v Sash Windows which said that if a worker is prevented from taking paid holiday by their employer, they are entitled to carry over without limit, and to a payment in respect of such leave on termination.
Does this also mean that an employee or worker who has been allowed to take holiday but has taken it unpaid is entitled to a similar payment in lieu on termination?
This is the latest development in the long running case of Smith v Pimlico Plumbers. We previously reported on this case here after Mr Smith was ultimately classed as a worker by the Supreme Court. He was therefore entitled to basic employment rights, including holiday pay.
Even though Mr Smith was considered by Pimlico Plumbers to be self-employed at the time, he did take periods of leave that were unpaid. 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 for being out of time. Any claim that he had unlawfully been refused holiday pay or had suffered unauthorised deductions from wages had to be brought within three months of the most recent refusal or deduction respectively. His holiday pay claim amounted to £74,000. He appealed to the Employment Appeal Tribunal.
Mr Smith’s appeal relied on the decision in King v Sash Windows, i.e. that a worker who does not exercise his or her right to paid leave because the employer refuses to pay for it must be permitted to carry over and accumulate such leave until termination, and then receive a payment in respect of all such untaken leave.
The EAT considered that this case was in fact different, as Mr Smith had actually taken the holiday, but had not been paid for it. Therefore, Mr Smith did not have the right to any carry- over payment for annual leave from year to year.
The decision in King v Sash Windows was not concerned with leave that was taken but unpaid, and there was nothing in it to suggest that the carry-over rights applied to leave that was taken, even if that leave was unpaid.
The EAT also decided that the tribunal was right to decide that it was reasonably practicable for Mr Smith to have brought his claim in respect of holiday pay within the relevant time limits, and therefore his claim was out of time. It also commented that Bear Scotland v Fulton (which held that a claim for holiday backpay could not go back beyond a gap of more than 3 months) survived the King case, but it did not need to consider it because the claim was out of time.
This is a very important decision, particularly in relation to any individuals who may have been categorised as self-employed and taken unpaid holiday similar to Mr Smith.
This case could be of assistance to employers in the event of claims being made by such individuals on the basis that they are workers, for carry-over payment on termination where they have taken unpaid leave.
The case is another example of the ongoing issues involved in defining employment status in the gig economy.
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.