Breaking News – Another important holiday pay case
Yesterday a judgment was issued by the European Court of Justice which could have very significant implications for all holiday pay cases in the UK, especially in the ‘gig economy’.
The case of King v The Sash Windows Workshop Limited had been ongoing for some time through the UK courts, and relates to Mr King’s annual leave for the period from 1999 to 2012.
The Sash Windows Workshop (SWW) said that Mr King was self-employed and was therefore not entitled to paid holiday. During the years in question, he had taken time off, but it had always been without pay, and in one of the years he had taken no leave at all.
After SWW terminated their relationship with Mr King, he brought a claim for his holiday pay. He claimed that he should have been entitled to paid holiday all along, and that as he had been prevented from taking any paid leave, his entitlement should have been carried forward.
Although it was clear that in the circumstances Mr King had met the definition of ‘worker’, the problem he had was that Regulation 13(9) of the Working Time Regulations specifically states that workers cannot carry forward leave – it has to be taken within the relevant holiday year, otherwise it is lost.
Mr King’s argument was that Regulation 13(9) cannot apply if the employer has prevented the worker from taking the leave.
The Employment Tribunal found in his favour, but SWW appealed to the Employment Appeal Tribunal, and the EAT upheld SWW’s appeal. Mr King then appealed to the Court of Appeal, and the Court of Appeal referred the case to the European Court.
The European Court said that Regulation 13(9) is incompatible with EU law and should be disregarded. The Court seems to have seized the opportunity to set out some clear principles that apply to the right to take paid annual leave. It decided that SWW was wrong to say that Mr King was not entitled to paid leave, and that the company must face the consequences of not allowing him to exercise his statutory right. The conclusion was that a worker must be allowed to carry over and accumulate untaken leave – and the Court placed no limit on the time period for that, so it could potentially carry forward indefinitely. Therefore claims could potentially be backdated to when the Working Time Regulations 1998 came into force.
This will be particularly relevant for the recent cases we have seen in the ‘gig economy’ such as Uber, CitySprint and Pimlico Plumbers. Many of those businesses are of course relatively new, and therefore they may not be worried about 19 years of backdating. However, where previously the value of any holiday pay claims would potentially have been limited to the holiday pay for one leave year, that is clearly no longer the case, so their potential exposure to more claims, and claims with higher value, is much greater.
It is of course worth noting that the European Court’s decision only applies to the 20 days’ leave granted under the Working Time Directive, and not to the additional 8 days’ statutory leave given in the UK under the Working Time Regulations. It also doesn’t apply to any contractual leave an employer may give over and above these minimum entitlements.
The case may also affect the interpretation of some of the UK’s previous key case law, particularly the Bear Scotland case regarding voluntary overtime in holiday pay (and potentially also the Lock case regarding commission in holiday pay). As we covered at the time, one of the aspects of the Bear Scotland decision which was a bit of a grey area was the idea that in a ‘series of deductions’ (i.e. a series of incidents of non-paid or under-paid holiday pay) if there was a gap of more than 3 months, that would time-bar an employee from bringing an unlawful deduction of wages claim for the period before the gap.
Following the Bear Scotland case, the Government introduced new regulations to limit the period of any unlawful deduction from wages claim (which would include a claim for unpaid holiday pay) to a maximum of 2 years (see our article on this here). It now appears those regulations are highly likely to be challenged.
All in all, this is a decision which could now open the floodgates for holiday pay claims, and of course now that Tribunal fees have been abolished there is little for workers to lose in giving their claims a try. We will continue to keep you updated on developments via our monthly ebulletins.
This can be a complex and difficult area of law. We have experience of dealing with holiday pay cases, so do give us a call if you have an issue we can help with.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).