holiday pay just got a whole lot more complicated (and costly …)

A recent holiday pay ruling from the European Court of Justice is likely to have costly implications for any business which engages “self-employed” staff.

In King v The Sash Window Workshop, Mr King worked for Sash Window Workshop Ltd (the Company) for 13 years as a “commission only salesman”.  Both he and the Company worked on the basis that he was self-employed.  Amongst other things, this meant that when he wanted time off work, he took the time but wasn’t paid for it.  When the Company decided to end his arrangement with Mr King he claimed that he was in fact a “worker” and that he should have received holiday pay throughout the time he worked for the Company.

The Employment Appeal Tribunal (EAT) agreed that Mr King was a worker and therefore entitled to be paid holiday pay.  However, the EAT also decided that Mr King had not been prevented from taking holiday and that his right to holiday pay ended at the end of each holiday year.  The EAT believed that, under the Working Time Regulations, this holiday could not be carried forward to later holiday years.

The question which was put before the European Court was whether it was possible for employees to carry holiday forward indefinitely if, like Mr King, the worker had been prevented or discouraged from taking holiday because they knew that they would not be paid for the time off.

As is often the case, the European Court took a purposive approach and sought to reinforce the principle that workers should receive a minimum paid annual leave it entitlement.  The Court said that if workers have been deterred from taking holiday because they believed that it would be unpaid, them they should receive a payment for all of their accrued but untaken holiday when their work ends.  The European Court was clear that there was no limit on the amount of leave which could be carried over.  Mr King’s claim is valued at around £27,000 and it’s easy to see that many other businesses could face similar liabilities.

So, what happens from here?  The UK Court of Appeal will make a decision on the specific facts of Mr King’s case to apply the European Court’s judgment.  Until that time, we’re facing uncertainty about the effectiveness of UK legislation which limited backdated holiday pay claims to 2 years and previous court decisions which established the principle that claims for unpaid holiday wouldn’t succeed beyond any break of 3 months or more between periods of leave.

We’d advise that you take seriously any questions from “self-employed” staff or “workers” who suggest that they’re entitled to holiday pay.  Any requests for time off should not be discouraged and you’ll need to be clear about whether you want to pay those individuals for times when they’re not at work.  We can help you set up contracts and working practices which will minimise your risk – just get in touch to arrange a time to meet up.

 

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