Case law in both Europe and the UK has established that workers must be allowed to take holiday at a later date if they cannot take it because of sickness and that this happens automatically – a worker does not have to make a request to carry forward leave in this way. This is an exception to the usual rule that holiday entitlement expires at the end of a leave year.
The preliminary opinion of the European Court in The Sash Window Workshop Ltd v King suggests this principle can apply where a worker has not taken holiday because paid leave is not offered.
The claimant was a commission-only salesman who worked for the employer from 1999 until his dismissal in 2012. In 2008 he was offered an employment contract but elected to remain self-employed. He had taken time away from work each year but was not paid for any holiday.
A tribunal found that he was a worker and was entitled to bring a complaint of unpaid holiday pay for the whole period of his employment, as an unlawful deductions from wages claim on a continuing basis. After the EAT had allowed an appeal, the Court of Appeal referred the case to the European Court to decide whether a worker has the right to carry forward holiday entitlement in those circumstances, and if so whether any carried forward holiday has to be taken within a specified period.
In its non-binding formal Opinion for the European Court, the Advocate General's view is that if a worker does not take annual leave in the leave year, in circumstances where he would have done so but for the fact that the employer does not give paid leave, the right to paid annual leave carries over until the worker has an opportunity to exercise it. When employment ends, the worker is entitled to pay in lieu of untaken annual leave for the whole of the employment relationship, or up to the point when paid leave was provided. Workers do not have to take leave first as a pre-requisite to establishing whether they are entitled to be paid for it; the onus is on employers to provide "adequate facilities" for workers to take their holiday entitlement. The Advocate General said that the offer of a contract of employment with a "sufficiently detailed contractual term on the exercise of paid annual leave" would be required.
The Opinion recommends that the case should go back to the UK to decide whether the offer of an employment contract in 2008 was an "adequate facility" for the exercise of the right to paid annual leave – if so, the claimant would only be able to claim pay in lieu up to that point.
The final decision is likely to come out before Brexit. The government white paper published in March makes it clear that courts and tribunals will continue to give effect to existing CJEU case law. In relation to holiday pay entitlements the document expressly states "CJEU case law governs the calculation of holiday pay entitlements for UK workers: failure to carry across that case law would be to create uncertainty for workers and employers".
The possibility that the European Court will take the same line as the Opinion when it makes its decision raises the prospect of workers who are regarded as self-employed being able to challenge their status on termination and potentially claim large amounts of pay in lieu going back over the whole period of employment. It is unclear whether the current two year limit on the level of back pay and holiday pay that can be claimed for unauthorised deductions from wages (introduced in response to the claims for holiday pay for commission/overtime) would be valid under EU law in this situation. The Opinion does make clear, however, that once an adequate facility for paid leave is offered then "use it or lose it" applies.