Author: Claire Dewhurst
A decision by the ECJ has highlighted the risks of wrongly categorising a worker as self employed, and therefore failing to pay holiday pay. The decision will have far reaching consequences for many employers, particularly those operating in the “gig economy”.
Mr King’s contract with his employer was as a self employed contractor. It was silent on the question of annual leave and he was not paid for it. During the period between 1999 – 2012 Mr King did not take approximately 41.5 weeks of paid holiday – he did take other holidays, but without pay. He had either been too busy to take holiday or had not taken it because it was not paid. On his dismissal in 2012 Mr King claimed to be able to carry over all of the untaken leave and required it to be paid. Importantly the Working Time Regulations 1998 provide that leave may only be taken in the year in respect of which it is due; it cannot be carried over.
Mr King succeeded at the ET but failed at the EAT. The Court of Appeal then referred the matter to the ECJ who supported the claim to carry leave over. The ECJ noted that the employer had benefited from Mr King not taking his leave, that it was irrelevant that the employer considered wrongly that Mr King was not entitled to annual leave and that an employer who does not allow a worker to take annual leave must bear the consequences. The ECJ judgement requires that 1) a worker knows that he is going to be paid before he takes leave; and 2) that a worker can carry over and accumulate until the end of the employment relationship any leave which he is prevented by his employer from taking.
This decision confirms that workers can, in fact, claim unpaid leave going back to 1996 when the original Working Time Directive came into force. (It is worth noting that the decision only applied to the 20 days of European leave and not to the additional eight days under the Working Time Regulations) The decision also casts serious doubt on the lawfulness of the 2014 regulations introduced by the government to impose a cap of two years on retrospective unlawful deductions from wages claims, including claims for holiday pay, and the decision in the Bear Scotland case that the series of deductions was stopped wherever there was a longer than three month gap between periods of holiday. While strictly speaking both of these related to underpayment of holiday rather than non payment, the principles applied by the ECJ apply equally.
In light of this decision, we recommend that employers review the status of their workforce and carefully consider whether or not they are correctly categorising their staff, and in turn whether or not they are paying the correct amounts in relation to holiday pay. If you have been underpaying in relation to holiday pay it is likely to be preferable to take action now to minimise that risk, rather than continue to accrue a potential liability.
For more information or guidance on how to limit the risks of a claim for back payment of holiday please contact Claire Dewhurst on 0203 008 5721 or firstname.lastname@example.org