If you thought that the holiday pay saga was over, think again. The Court of Justice of the European Union handed down its judgment last week in King v. The Sash Window Workshop Ltd.
In finding for Mr King, the European Court held that, if an employer fails to pay a worker for annual leave, it is incompatible with the EU Working Time Directive to require that worker to take unpaid leave first in order for him to establish his right to paid leave. The Court stated that a worker who has been deterred from taking annual leave due to the fact that he will receive no payment for it from his employer must be put in a position comparable to that which he would have been in had he exercised the right to take annual leave (and been paid for it). This is consistent with the trend of the European case law on holiday pay. Workers should be allowed to take their holidays – and they should be paid for them. Perhaps of more concern from this case is that the Court held that such a worker would therefore be entitled to claim payment in lieu of accrued but untaken leave back to the start of the employment relationship.
In Mr King’s case, this meant that he would potentially be entitled to payment in lieu of 24.15 weeks of annual leave which he had accrued between 1 June 1999 and 6 October 2012. It’s now for the UK courts to determine the appropriate compensation which should be awarded to Mr King.
An interesting aspect of the case – but one which the Court did not deem it appropriate to consider – was that Sash WW had apparently offered Mr King an employment contract in 2008 under which he would have received paid holidays, but Mr King had declined to accept it.
This is the latest in a series of judgments by the European Court to emphasise that the right for workers to take annual leave, and to be paid for it, is a central right under EU law which must be protected.
The stakes are now potentially even higher for an employer who wrongly categorises an individual as self-employed when he is in fact a worker. In such circumstances, the worker may be able to claim payment in lieu of all of the annual leave that he would have been entitled to accrue during the entire period of his employment. As in Mr King’s case, this could result in high value claims going back over a very significant period of time.
As this was a case involving disputed employment status, it has been suggested that the impact of the Court’s judgment may be most widely felt by businesses in the "gig economy". Last month, we learned that Uber had lost its appeal against the decision of the employment tribunal which had held that its drivers were workers, and not self-employed as Uber had claimed. The Court’s judgment in King may now pave the way for workers who dispute their purported self-employed status to claim payment in lieu of the annual leave they were denied throughout the entire period of their engagement up to the termination date.
This case also raises interesting questions regarding the regulations which were introduced by the UK Government in the wake of the various holiday pay cases to limit an employer’s liability for backdated claims to a period of two years. The European Court’s statement in King that “the right to paid annual leave cannot be subject to any preconditions whatsoever”, may mean that the two year rule is itself vulnerable to legal challenge.
Similarly, the decision of the UK Employment Appeal Tribunal in Bear Scotland Limited v. Fulton, which held that a claim for a series of unlawful deductions will be broken wherever there is a gap of longer than three months between consecutive underpayments, may now also come under attack.
Whilst the precise impact of King is uncertain, what remains clear is that holiday pay issues are not going away any time soon. With the abolition of employment tribunal fees, such claims are now more likely than ever.