European Court of Justice rules worker can claim for 13 years of holiday pay

The European Court of Justice (‘ECJ’) has ruled that workers who are found to be entitled to paid leave can be compensated for all untaken leave that has accrued.

Mr King was engaged as a self-employed worker by the Sash Window Workshop Limited from 1999 -2012 but, in a dispute regarding his contract which did not specify if he was entitled to paid leave, a UK employment tribunal ruled that he should have received workers’ rights. Mr King’s claim was for £27,000 for three types of holiday pay;

1. Holiday accrued but untaken at termination in the final leave year (2012/13)
2. Leave actually taken between 1999 and 2012 where no payment was made
3. Pay in lieu of accrued but untaken leave throughout the whole period of Mr King’s employment (24.15 weeks in total)

The ECJ ruled there was no time bar to Mr King’s claims on the basis that a worker must be able to carry over and accumulate unexercised rights to paid annual leave where they have not been in a position to exercise their right to annual leave. The ECJ also said that it is irrelevant whether or not over the years, Mr King actually made any request for paid annual leave.  The case has now been referred to the Court of Appeal.

See the full case here.

Aspire Comment

This ruling could have huge implications for the gig economy with the risk of individuals who have been classified as self-employed bringing claims for holiday pay for the duration of their engagement.  As anyone can bring a claim to Tribunal free of charge, following the abolishment of tribunal fees, this presents significant risk. Mr King was paid £27,000 for his claim against Sash Window Workshop Limited however, firms who have wrongly classified hundreds of workers’ employment status could see much higher liabilities.

Our view is that this case is wholly different to claims for the incorrect calculation of holiday pay, which has also hit headlines in recent years. Following a number of cases where holiday pay has been calculated incorrectly on the basis that overtime/commission payments were not taken into account, legislation took effect in January 2015, (The Deduction from Earnings Limitation Regulations 2014) to restrict backdated claims to a maximum of 2 years for any claims presented to tribunal from 1st July 2015 onwards.

In addition to this, it was decided that the employee has to bring an unlawful deduction claim within 3 months of the last in a series of “unlawful deductions”.  A payment of the correct rate of holiday pay (for the remaining 1.6 weeks’ entitlement in an annual leave year) or a payment at a corrected rate could cause a break in the series if there has not been an “unlawful deduction” within the prior 3 month period.

However, for the time being, if you have incorrectly engaged an individual as self-employed and so, denied their entitlement to paid annual leave, you could be at risk.  The decision in the King v The Sash Window Company Limited case will now go to The Court of Appeal.  We will await the outcome with interest to see if the financial risk to companies impacted if the decision is upheld will be limited in the same way as the cost of correcting claims for holiday pay calculation to include overtime and commission.

Are you concerned that, if challenged at Tribunal, individuals you engage as self-employed could actually be classified as workers or employees? Get in touch with the Aspire team to discuss how we can help.