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Claims for retrospective holiday pay should be allowed

AG opinion poses risk to ‘gig economy’ employers, say lawyers

9 June 2017

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Workers are entitled to paid annual leave and can claim compensation for any holidays they are prevented from taking during their employment, according to an opinion from the advocate general of the European Court of Justice.

The AG gave the opinion after the UK Court of Appeal sought clarification on the employment rights of Mr King, a window salesman, who had brought a case against his former employer, the Sash Window Workshop Ltd (SWWL), over paid leave.

King had worked on a ‘self-employed commission only’ contract for SWWL for 13 years, in which there was no right to paid leave in his contract nor mention of paid annual leave. In 2008, SWWL offered him an employment contract that included those rights but he stayed self-employed.

Upon being dismissed in 2012, aged 65, he successfully appealed his case to the employment tribunal on the grounds of age discrimination and was awarded more than £27,000 in holiday pay.

However, SWWL disputed the fact that King had received more than £9,000 for leave which he was entitled to but didn’t take, and successfully appealed to the employment appeal tribunal.

When King appealed to the Court of Appeal in February 2016, SWWL argued that he was out of time to recover the sum, but the justices observed the ET’s initial decision, which held that any untaken leave could be carried forward because SWWL was never prepared to pay for it, so that the right to pay in lieu was triggered at dismissal.

The Court of Appeal sought clarification from the CJEU as to whether King was entitled to paid annual leave despite not taking steps to invoke the right to it until the employment relationship was terminated and the circumstances under which untaken paid leave could be carried over.

Giving his opinion, AG Tanchev said: ‘If a worker does not take all or some of the annual leave to which he is entitled in the leave year when any right should be exercised, in circumstances where he would have done so but for the fact that the employer refuses to pay him for any period of leave he takes, the worker can claim that he is prevented from exercising his right to paid leave such that the right carries over until he has had such opportunity to exercise it.

‘Upon termination of the employment relationship… a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave.

‘If an adequate facility for exercise of the right to paid annual leave was never provided, then an allowance is due… to cover the full period of employment until termination of the employment relationship.’

AG Tanchev did not specify any limit to the carry over period following the end of the holiday year in which leave can be accrued.

He also advised that employers rather than workers should take all the necessary steps to ascertain whether they are bound to create an adequate facility for the exercise of the right to paid annual leave. Failure to do so ‘will risk having to make a payment in lieu of unpaid leave on termination of the employment relationship’.

King’s lawyers said the decision could impact the so-called ‘gig economy’. James Williams, a barrister at Henderson Chambers, commented: ‘If the AG’s opinion is followed by the CJEU, it will have profound consequences for many businesses with workforces of uncertain or marginal employment status. Employers could face a large number of such claims, since a worker should no longer need to risk his job to bring it.’

Clare Gilroy-Scott, a partner at Goodman Derrick, who also represented King, added: ‘Prudent employers will want to consider the employment status of their workforce, assess the risk and potential cost of backdated holiday pay claims, and ensure that their workers, as well as employees, have a “facility” for the exercise of their right to paid annual leave, without having to resort to costly legal action in order to enforce that right.’

Philip Harman, a partner in the employment and pensions group at DAC Beachcroft, commented: ‘The case is particularly topical given the soon-to-be published Taylor review and the recent high-profile worker status cases involving Uber and CitySprint, among others.

‘The AG’s opinion is not binding on the CJEU nor UK employers at this stage. Nevertheless, employers will be watching the progress of this case carefully because, unless the CJEU limits the carry-over period, a finding of worker status could result in further holiday pay being due.’

Matthew Rogers is a legal reporter at Solicitors Journal

matthew.rogers@solicitorsjournal.co.uk | @lex_progress

Categorised in:

Employment EU & International International

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HOLIDAY European Court of Justice