What does this mean for employers?
This decision expands the scope of the right to carry over holiday to situations where individuals are prevented from taking their leave for reasons other than sickness absence. It means that if an individual is found to be a worker and he can say s/he would have retrospectively taken more holidays had s/he been paid for them, then the worker would be entitled to carry over the holidays until he is paid for them on termination.
Significantly, the CJEU has said that there should not be any limit on carry-over, which could mean that such individuals may claim holiday pay going back a number of years. This principle might not be limited to individuals found to be a worker; it might apply to those who have had long term absences or have not taken their leave for reasons other than sickness (such as maternity) - this is likely to be a subject for further litigation although we are doubtful on whether it will succeed.
In terms of sickness absence, the Court made it clear that a distinction could be drawn between Mr King's scenario (where the leave is not taken because it will not be paid) and the situation where annual leave is not taken by the worker because of illness. This means that the principle limiting carry-over of holiday to 15/18 months in the case of sickness absence remains untouched.
Today's decision is particularly topical given the recent high-profile worker status cases involving Uber and Deliveroo and others. The CJEU said that it is irrelevant if the employer wrongly concludes that an individual is not entitled to paid holiday because s/he is self employed. It is up to the employer to get this right and if it doesn't allow a worker to exercise his rights it must bear the consequences. This adds another layer of complexity for the government to consider on whether to change our laws on employment status in the light of the Taylor report.
The CJEU's decision is not binding on UK employers at this stage. The case will now go back to the Court of Appeal who will look at whether the WTRs can be interpreted in line with the decision. However, businesses which engage individuals on contracts without paid holiday, will need to monitor this case's outcome as it could result in further holiday pay being due.
Finally, this case could mean the Regulations introduced to limit the backdating of claims for unpaid wages to two years may be incompatible with EU law. There are likely to be cases to explore this. If they went in favour of the employee, this would be bad news for employers facing claims for non-payment of overtime in the first four weeks of holiday each year. However, we think there are good arguments why the two year limit can and should stand. We will update you as holiday pay law moves on.
Facts and background
Mr King worked for Sash Windows for 13 years on a self-employed basis as a salesperson (1999 – 2012). He was paid on a commission only basis.
As he was purportedly self-employed his contract was silent on the question of paid annual leave. In 2009 Sash Window offered Mr King an employment contract but he elected to remain self-employed. Some years, he took his full annual leave entitlement, but there were a number of years in which he did not request all of it. The tribunals accepted that Mr King would have taken more holiday had he been paid for his leave.
Sash Windows terminated his contract when he reached 65. Mr King brought claims in the employment tribunal for age discrimination and unpaid holiday pay under the WTR 1998. The employment tribunal accepted that both the company and Mr King had mistakenly believed that he was self-employed. He was in fact a worker.
Mr King brought his claim for holidays under 3 separate heads:
- Holiday pay relating to paid leave accrued but untaken during Mr King's final (incomplete) leave year.
- Holiday pay relating to holiday which Mr King actually took during the previous 13 years with Sash Windows but was not paid.
- Holiday pay relating to leave which Mr King was entitled to by virtue of being a worker whilst working with Sash Windows but had not actually taken.
Mr King succeeded in the employment tribunal with respect to his claim for discrimination and paid holidays under all three heads, however, the claim for holiday under point 3 above was appealed to the EAT and then the Court of Appeal. The Court of Appeal referred the case to the CJEU.