Just last week, the Court of Justice of the European Union (CJEU) handed down a decision that could have significant implications for employers who have not paid holiday pay to individuals, who they mistakenly engaged as self-employed consultants or contractors.
Those wrongly classed individuals may now be able to claim back pay, from the employer, for unpaid annual leave going back many years, to when they could have been first classed as having ‘worker’ status. Whilst the CJEU made their position clear, ‘an employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences’, employers could be faced with a significant administrative burden and associated costs.
King v The Sash Window Workshop Ltd
The case of King v The Sash Window Workshop Ltd centres around the fact that Mr King was engaged as an independent contractor for 13 years. During this time, he had not been paid for any leave and consequently, in some years, he had not taken any leave. An employment tribunal found that he had been incorrectly categorised and that he was in fact a “worker”. The issue was then, how much holiday pay he was entitled to. The ECJ concluded that a worker should be able to carry over and continue to accumulate paid annual leave until the termination of employment in cases like this, where the worker has been unable to exercise his or her rights over several consecutive years because the employer failed to provide paid leave. This case will now return to the Court of Appeal which will need to determine whether the Working Time Regulations can be interpreted in light of the CJEU’s ruling and, if so, whether Mr King will indeed be able to claim 13 years’ holiday back pay equating to approximately £27,000.
What does this mean for employers?
The decision potentially leaves employers of gig workers with significant financial and administrative ramifications. Those engaging individuals on an on-going self-employed basis, would be well advised to take steps now to protect against the risk of such claims. They should conduct an assessment of their workforce and ensure their actual relationships with their employees and contractors reflect their intended relationships and that they have in place all the correct documentation to protect their business going forward. Anyone struggling with uncertainty over the correct status of those they engage in the business, should consult an experienced employment lawyer for clarification and assessment.