King v Sash Windows – Holiday Pay Judgement
1st December 2017
Under the UK’s Working Time Regulations 1998, if paid holiday is not taken in a leave year then it will be lost. However, in this important judgment, the Court of Justice of the European Union (CJEU) has disagreed.
The Court held that these national provisions are incompatible with EU law and the right to paid leave. If a worker chooses not to take holiday leave because the employer refuses to grant paid holidays, then the employee will be prevented from exercising their EU rights. Under such circumstances, the Court has held that the employee can carry the holidays over. The Court is keen to ensure that an employer who does not grant paid holiday to workers will bear the consequences, and will not benefit from leave being lost at the beginning of a new holiday year.
In short the CJEU held that:
- A worker is entitled to be told by the employer that he will receive paid annual leave before he takes any holidays. In a situation where an employer grants only unpaid leave, this has the effect that the worker has to take leave before establishing whether he has a right to be paid and this is incompatible with the Working Time Directive.
- A worker can carry over and accumulate untaken leave until the end of the employment relationship, if the employer denied the right to paid leave. Any national provisions or practices that prevent a worker from carrying over or accumulating the leave will be disregarded.
In this case, the employer regarded Mr King as self-employed and therefore not entitled to paid holidays. In 2008, the employer offered Mr King an employment contract. However, Mr King refused and chose to remain ‘self-employed’. Despite this, the Court held that Mr King was a worker and is therefore entitled to 4 weeks paid EU holiday leave. This is less than the 5.6 weeks paid holiday leave workers are entitled to under UK law. The fact that the employer wrongly considered that Mr King was not entitled to annual leave was found to be irrelevant. The court further stated that it was irrelevant whether or not Mr King made requests for paid annual leave.
This has wide ranging implications for businesses that have wrongly classified individuals as self-\ employed contractors. If they are in fact workers they can bring claims for unpaid holiday pay going back years. This is particularly important for businesses operating in the gig economy. With holiday pay having the potential to carry over, a worker could make a holiday pay claim dated back to 1996 (when the original Working Time Directive came into force). Therefore, workers would be entitled to backdated holiday pay for up to 20 years service. This could leave employers, such as Uber and its 40,000 workers, facing substantial claims.
Employers do have a measure of protection. The Deduction from Wages (Limitation) Regulations 2014 limits claims on retrospective unlawful deductions claims for unpaid holidays to two years for claims brought after 1 July 2015. In situation where a worker is denied paid leave over a number of years he can preserve his position by bringing a claim every two years. In addition, claims must be brought within three months of the unlawful deduction; therefore a three month gap between deductions will break the chain in a series of deductions. A word of caution however, the judgment of the CJEU could provide the basis for an argument that the two year back-pay limit under the 2014 Regulations and the three month rule are incompatible with EU law.
If you require any help or advice as a result of this judgement, or indeed anything to do with employment law, please do not hesitate to contact our Employment team:
Martin Stephen: email@example.com
Liam Entwistle: firstname.lastname@example.org
Andrew Wilson: email@example.com
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