CA holds the right to holiday pay for unpaid leave carries over to termination

Wednesday 23rd February 2022

In Smith v Pimlico Plumbers Ltd, the CA has held that the right to payment for annual leave carries over from year to year when holiday is taken, but was unpaid.

Mr. Smith was engaged as a plumber by Pimlico until May 2011.  He subsequently brought several employment related claims.  Pimlico viewed Mr. Smith as a self-employed contractor with no entitlement to paid holiday.  The SC held in 2018 that Mr. Smith satisfied the definition of worker under the ERA 1996, following which his claims for holiday pay and unauthorised deductions were considered by the ET.

To the extent that Mr. Smith had unlawfully been refused holiday pay, the ET held that his claims were out of time, having not been brought within 3 months of the most recent refusal. The ET then considered whether Mr. Smith could rely on the CJEU decision in King v Sash Window Workshop Ltd and carry over from year to year a right to claim payment for unpaid leave.

King established that a worker who does not exercise the right to take holiday because their employer refuses to pay for it, is permitted to carry over and accumulate such leave until termination, and should then receive a payment in respect of it.

Although Mr. Smith had been permitted to take holiday and had done so on numerous occasions, his leave had been unpaid.  Mr. Smith, relying on King, argued that on the termination of his contract, he should have received holiday pay. The ET held that King did not apply because, unlike Mr. King, Mr. Smith had taken annual leave despite Pimlico’s refusal to make payment.  The EAT agreed.

The CA allowed Mr. Smith’s appeal, holding that King allowed a worker to carry over a right to payment for annual leave. The CA highlighted the CJEU’s position that there is a single right to “paid annual leave” which must not be “subject to any preconditions whatsoever”. The right is only lost when the employer can show that it gave the worker the opportunity to take paid annual leave, encouraged them to do so and informed them that the leave would be forfeited if it was not taken. Otherwise, the right accumulates until termination, when a worker is entitled to payment in lieu and provided the claim is made within 3 months of the termination date, it will be in time.

The CA also expressed the view, albeit provisionally and not strictly necessary, that a gap of more than 3 months between deductions did not prevent them from forming a “series” for an unlawful deductions claim, contrary to the EAT’s decision in Bear Scotland Ltd v Fulton.

All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.