The European Court of Justice has today handed down a judgment on holiday pay in the case of King v Sash Windows that will have huge implications for the thousands of workers denied paid holiday because they are wrongly believed to be self employed.
Mr King worked as a commission-based salesman for The Sash Window Workshop for 13 years. He was dismissed when he reached the age of 65 and in order to bring a claim of age discrimination, he had to argue that he was a ‘worker’ rather than being self-employed.
As a worker, he argued he was entitled to receive payment for previously taken unpaid leave. He also claimed for all holiday that had accrued from the start of his employment back in 2001 which, he argued, he had not been able to take because the company did not provide any pay during periods of leave.
The Sash Window Workshop agreed that if Mr King was a ‘worker’, rather than being self-employed, he was entitled to receive a payment for accrued holiday pay in the current holiday year - but not for previous years as these were time barred.
Mr King was initially successful at the Employment Tribunal and was awarded compensation for all of his untaken holiday. However, Sash successfully appealed to the EAT and the case went to the Court of Appeal, who in turn referred a number of questions about the Working Time Regulations to the ECJ.
The Court of Appeal wanted clarification on whether paid leave can be carried over indefinitely in circumstances where a worker has not exercised his rights because any leave that he wished to take was unpaid.
Currently, statutory holiday entitlement under the Working Time Directive expires at the end of each leave year and is lost if not taken. The only exception to this is if at the end of a leave year, a worker who is off sick has been unable to take planned annual leave due to sickness absence.
Today the ECJ has said Mr King should, in principle, be compensated for all untaken leave that had accrued during his 13 years employment. It reiterated that paid holiday is an important health and safety initiative which is necessary for workers to recover from the demands of working. Workers must not be dissuaded from taking it and must be paid.
What happens next?
The matter will now be referred back to the Court of Appeal to determine whether the Working Time Regulations can be interpreted in this way. Currently, the WTR’s only provide a remedy to a worker to receive holiday pay for leave that he has already taken if it was unpaid. If it gets over this hurdle (which is likely), workers will be able to carry holiday over to subsequent holiday years or obtain a lump sum for up to 4 weeks untaken holiday per year when their employment ends.
Will this decision affect other workers wrongly working under self employed contracts?
Yes. This important decision is likely to encourage those currently regarded as self-employed to challenge their status and will create another headache for Uber who has around 40,000 drivers which have been held to be workers.
Alan Lewis, an employment partner at law firm Irwin Mitchell, said: “Following today’s ruling, businesses with workforces of uncertain or marginal employment status could be facing huge financial liabilities for holiday pay. The European court has made clear its forthright position by stating: ‘An employer that does not allow a worker to exercise his right to annual leave must bear the consequences.’ Gig-economy employers in particular will be affected hugely by the decision.”