Holiday pay
Friday 8th December 2017
The ECJ has handed down its decision in King v The Sash Window Workshop Ltd.
Mr King began working for SWWL in June 1999 as a salesman on a “self-employed commission only contract”, which was silent on holiday entitlement. In 2008, he was offered an employment contract, including a right to paid annual leave, but he preferred to remain self-employed. Mr King was dismissed in October 2012 when he turned 65. He was not paid for any annual leave taken.
Mr King’s claims for age discrimination and holiday pay were successful in the ET, where he was held to be a worker. The ET awarded holiday pay for the days taken and for untaken days accrued since June 1999.
SWWL successfully appealed to the EAT regarding the holiday pay awarded for accrued but untaken leave. The EAT considered that the ET had failed to make any findings of fact supporting the conclusion that Mr King had been unable to take his accrued leave as a result of circumstances beyond his control, meaning any entitlement to holiday expired at the end of the relevant leave year.
Mr King appealed to the CA, which made a referral to the ECJ. The ECJ considered that if a worker is unable to exercise the right to paid annual leave for reasons outside their control, they are entitled to a payment in lieu with no limitation. The ECJ also considered that it was irrelevant if the employer had wrongly concluded that the individual was not entitled to paid annual leave.
While the ECJ noted the case law allowing limits on carrying over leave, they are only applicable when employers have allowed workers to exercise their right to take paid annual leave. If they have not done so, a worker is entitled, on termination, to payment in lieu of all accrued but untaken holiday.
The ECJ’s decision means that those wrongly classified as self-employed, for example the various gig-economy staff who have recently won worker status claims, can claim backdated holiday pay on termination. This liability could stretch back as far as 1996, when the original EU Directive took effect, but is limited to 4 weeks of holiday derived from EU law and not the additional 1.6 weeks granted by UK law.
The case will now return to the CA and we will report any further developments.
All information in this update is intended for general guidance only and is not intended to be comprehensive, or to provide legal advice.