The European Court of Justice (ECJ) has consistently found that the right to paid annual leave is a right that cannot be interpreted restrictively or diminished by national provisions that trim the edges. Yesterday’s ECJ decision in King v The Sash Window Workshop Ltd is no exception, but taken at face value could lead to a stampede of claims from “workers” who have been potentially mis-categorised as self-employed. The incentive to bring such claims is now greater as this decision opens the door to compensation that may cover many years of unpaid leave and therefore might be very significant in liability terms.

Mr King had not been paid for leave in the 13 years he was engaged by Sash Windows Workshop Ltd as an “independent contractor” and had, in some years, not taken leave as a result. An employment tribunal had found that he was actually a “worker” and the outstanding issue related to how much holiday pay he was entitled to. The ECJ commented that the employer had benefitted from him not taking his leave and that “an employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences”.

The ECJ held that where an employer has denied a worker the right to paid leave, the worker does not have to take unpaid leave before being able to bring a claim. This would put them in a difficult financial position and inevitably deter them from taking leave. To the extent that the Working Time Regulations 1998 (WTR) suggest otherwise, the ECJ found the provisions to be incompatible with the EU provisions.

Further, in this situation, that worker can accumulate and carry over the untaken leave until the end of the working relationship. There is no limit to the number of years this could cover, potentially going back to the introduction of the WTR in 1998.

The case will need to return to the Court of Appeal to implement the ECJ judgement, but the implications could be financially damaging for many businesses and ruinous for some. The real problem is the lack of clarity over the status of workers and the genuinely self-employed. Many businesses who have been trying to navigate these uncertain definitions could find themselves in a difficult position through no fault of their own. One of the recommendations from the House of Commons Work and Pensions and BEIS Committees (following the Taylor Review earlier this year) is to provide greater clarity on the definitions of “employee” and “worker”, as well as introducing a rebuttable presumption of worker status where there is a dispute over whether the individual is self-employed or a worker. Whilst legislative change will still be some way off, the direction of travel is in favour of the worker and businesses need to ensure they appropriately plan for this by examining the way they employee or engage their staff and evaluating potential liability risk and providing accordingly.