In the referral to the European Court in King v The Sash Window Workshop Ltd and another, Advocate General Tanchev has given his opinion that workers should be paid, on termination of employment, for any accrued untaken leave where they have been disincentivised from taking leave because they would not have been paid for it.

Under the Working Time Regulations, a worker can only bring a claim for holiday pay as a claim for unpaid wages after taking the leave. The Court of Appeal (following ECJ case law) held in NHS Leeds v Larner [2012] IRLR 825 that workers are entitled to carry forward leave from previous leave years when they have been unable or unwilling to take it because of sick leave. It also held that workers should be paid on termination for leave which has been carried forward in this way (that is because of sick leave). The current case, however, was not concerned with a worker who could not take holiday because of sick leave, but with a worker who had not taken holiday because he would not have been paid for it.

Mr King was a commission-only salesman for The Sash Window Workshop. During a period of 13 years he was not paid salary, holiday pay or sick pay. He was offered an employment contract which included paid holiday but he did not take up the offer. His contract was terminated when he turned 65. He brought claims for age discrimination and holiday pay. He argued that he had been discouraged from taking holiday because any leave taken was unpaid.

The employment tribunal found that he had been discriminated against on the ground of age. On the holiday pay claim, it found that Mr King was entitled to holiday pay for periods of annual leave which had been taken in the current and previous leave years (as a series of unlawful deductions from wages). It also found that Mr King was entitled to pay for accrued untaken holiday from the current leave year and from previous leave years.

The EAT did not agree. It determined that the tribunal had not made the necessary findings of fact to decide that Mr King had been prevented from taking annual leave by reasons beyond his control (as would be the case where a worker was unable to take holiday because he or she was on sick leave). The EAT held that the claimant had not suffered financial loss because in fact he had worked rather than taking holiday. The Court of Appeal referred a number of questions to the ECJ.

The Advocate General was of the opinion that a worker should not have to take unpaid leave before establishing an entitlement to be paid for that leave. He stated that the Working Time Directive gives workers the right to pay for holiday; workers should not have to take the step of taking unpaid leave before they can enforce that right. In his opinion, a worker who has not taken leave because it would have been unpaid is entitled to claim that he or she has been prevented from exercising the right to paid leave and any such leave can be carried over until the worker has the opportunity to exercise the right. A worker who has not had the opportunity to take paid leave throughout his or her employment should be able to carry over the leave for the whole period of employment and should be paid for the untaken leave on termination. In the Advocate General's opinion, a member state should only impose restrictions on the carry-over of annual leave if an employer has provided an adequate facility for workers to exercise their right to take paid annual leave (this might be the case, for example, where paid holiday is available but the worker has been unable to take holiday because of sickness).

If this opinion is followed by the ECJ it could lead to significant awards of arrears where workers have not taken holiday because it is unpaid. The case would be different where leave had been taken but the correct holiday pay had not been paid. In such a case, the two-year backstop on arrears in unlawful deductions from wages claims under the Deduction from Wages (Limitation) Regulations 2014 would apply to UK claims.