An Advocate General (AG)’s opinion has been delivered to the Court of Justice of the European Union (CJEU) which may have far reaching consequences for gig economy employers and anyone else engaging ‘workers’ (even if not labelled as such) who do not take paid holidays.

In the case of King v The Sash Window Workshop Ltd, the AG gave his opinion that a worker, misclassified as a self-employed consultant, was entitled to a payment in lieu of 13 years’ unpaid holiday pay on the termination of his working relationship. The AG’s opinion was that Mr King had been denied the opportunity to take the 4 weeks’ paid statutory holidays under the UK Working Time Regulations (WTR), derived from the European Working Time Directive (WTD).

The AG’s opinion is not binding, and we must now wait for the decision of the CJEU. However, if it follows the AG’s opinion, the decision could have significant financial repercussions for employers vulnerable to similar “worker” claims.

Mr King was a worker not a self-employed consultant

Mr King was engaged by The Sash Windows Workshop Ltd (Sash Windows) on the basis that he was a ‘self-employed consultant’. As such, he was paid only commission. Over the 13 years he was engaged, he took varying amounts of unpaid holiday each year. As a consultant he was not entitled to statutory holiday pay under the WTR. In 2008 he rejected an opportunity to instead carry on his engagement under an employment contract. When his engagement with Sash Windows came to an end in 2012, he sought compensation for holiday pay and pay in lieu of accrued but untaken annual leave for his entire engagement with Sash Windows, on the basis he had actually been a worker.

The Employment Tribunal (ET) determined that both parties had genuinely mistaken Mr King’s status – he was a worker not a self-employed consultant and, therefore, he was entitled to payment for statutory holiday under the WTR during his engagement.

Mr King had never requested to take any statutory holiday

The ET was then left to grapple with the difficult question of whether Mr King in fact had any claim relating to untaken statutory holiday which he purportedly accrued during his engagement given that, whilst Sash Windows had never afforded him the opportunity to take ‘paid’ statutory holiday, he had also never asked to take it.

Further, if the fact he had never requested it made no difference, should his claim be time-limited? Case law has already established that workers who are unable to take statutory holiday due to sickness are entitled to carry this over to a subsequent leave year, but subject to a maximum carry-over of 18 months from the end of the leave year.

The ET ultimately decided that Mr King should be awarded pay in lieu of accrued but untaken holiday for the whole of his 13 year engagement. Sash Windows appealed to the UK’s Court of Appeal, which ultimately referred a series of questions to the CJEU.

No request to take paid holiday necessary where employer has failed to provide adequate facilities to take it

The AG expressly stated that the WTD requires employers to provide “adequate facilities to workers” for the exercise of their right to take the minimum holiday required under the WTD. An adequate facility might take the form of specific contractual terms conferring the right to paid leave, or the establishment of a legally enforceable administration procedure through which can application be made to employers by workers for paid annual leave. Where no such facility is made available to a worker, they are entitled to rely on the WTD “to secure payment in lieu of untaken leave“.

And in such cases, no limit on holiday which can be carried over

The AG further concluded that “upon termination of the employment relationship… a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave“. Whilst a member state may impose “temporal and other restrictions” on the exercise of that right, such restrictions must fall within certain boundaries. The AG expressly found that where an adequate facility for the exercise of the right to paid annual leave was never in fact provided, a “limit to the carry over period of 18 months following the end of the holiday year in which the leave accrued is not compatible with [the WTD]“. Accordingly, the worker’s entitlement is to the “full period of employment until termination of the employment relationship“.

We must now wait for the CJEU to provide a definitive ruling

The AG’s opinion is merely the preliminary to a ruling from the CJEU. If the CJEU decides in the affirmative, that workers can carry over leave where they are unable to take paid leave for reasons beyond the worker’s control other than sickness, this could leave employers facing significant administrative and financial repercussions. The case will return to the CA who will need to determine if the WTR can be interpreted in light of the CJEU’s ruling and if so, whether Mr King’s claim stands up on the facts. Mr King’s 13 years’ holiday claim equates to a sum in the region of £27,000. An affirmative CJEU decision will also no doubt lead to debate over whether or not adequate facilities are provided in a variety of scenarios. Here, the potential failure to provide adequate facilities was a genuine mistake regarding status made by both parties. However, there may be other scenarios which employers will need to anticipate and prepare for.

For now we must wait and see, but employers should start preparing now for the possibility that the AG’s opinion is followed, and the significant financial repercussions that may follow.