Further to my colleague’s recent blogs regarding the ‘gig’ economy, a recent European Court of Justice (ECJ) decision has shed light on employers holiday pay liabilities where they have self-employed staff who are determined to be workers.
In the case of The Sash Window Workshop and another v King, the ECJ held that a worker who has been prohibited from taking holiday due to his employer’s refusal to pay for that holiday is entitled to be paid in respect of all accrued holiday to the date of termination of employment. In the case of King, he had been engaged for 13 years and so was entitled to be paid in respect of 13 years holiday which had accrued during his engagement.
Mr King worked for Sash Windows on what was believed to be a self-employed basis. His engagement was from 1 June 1999 until his retirement on 6 October 2012. King’s leave was always unpaid.
After the termination of the engagement, King brought a claim to recover payment for annual leave, comprising:
- Accrued but untaken holiday from his final year of work (2012/2013);
- The holiday that he actually took during the time he worked for Sash Windows, but which he was not paid for;
- The holiday that he was entitled to take, but did not in fact take, whilst working for Sash Windows.
By the time the case reached the Court of Appeal it had been accepted that King was a worker and accordingly entitled to holiday pay. The ECJ was required to consider King’s entitlement to the payment for holiday that he had not taken (point 3 above).
King argued that the right to payment in lieu of paid annual leave not taken did not arise until termination of the employment relationship and, accordingly, that his claim was brought in time.
Under the Working Time Directive, a worker has a right to take annual leave and to be paid in respect of that holiday. The ECJ, therefore, ruled that where a disagreement exists between a worker and his employer as to whether the worker is entitled to take paid holiday, it is not for the worker to take the leave in the first instance and then establish he has a right to be paid for it. This would place an unfair burden on the worker.
Importantly for employers, the ECJ stated that the fact that Sash Windows wrongly thought King was not entitled to be paid for holiday was immaterial. King was still entitled to be paid for the holiday.
Furthermore, the ECJ stated that the Working Time Directive prevents any provisions in UK law that limits a worker’s ability to carry forward annual leave where he had been unable to take that leave because of his employer’s refusal to pay him. As a result, King was entitled to be paid in respect of all of the holiday during his 13-year engagement for Sash Windows, whether he had taken the holiday or not.
The ECJ also ruled that, although with regard to other recent holiday pay cases, the Deduction from Wages (Limitation) Regulations 2014 limits employers’ liability for historic holiday pay to two years from the date of claim, such a limitation would not apply in cases such as King. The backstop would not apply and King would be entitled to 13 years unpaid holiday pay.
The ECJ’s ruling is another stark warning for employers concerning holiday pay. Employers in the gig economy where there are large number of self-employed staff who may be determined to be workers should take particular notice of this judgement. Ultimately, this decision could result in many employers facing, potentially, extremely large holiday pay liabilities.
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