An early Christmas present from the CJEU?

The latest judgment in the holiday pay case law saga has sent again sent ripples through the HR and employment law community and has the potential to prove costly for some employers.

Mr King worked for The Sash Window Company Limited from 1 June 1999 until 6 October 2012, when he retired.  Throughout that period both he and the company operated on the understanding that he was self-employed.  He was paid commission only.  As he was self-employed, any holidays that he took were unpaid.

After he retired, Mr King brought an Employment Tribunal claim seeking payment for the periods of holiday that he had taken and for his accrued, untaken holiday entitlement from 1999 to 2012.

The UK Working Time Regulations (Regulation 13(9)) state that leave may only be taken in the relevant holiday year and cannot be carried forward.  Prior to King, this regulation had already been weakened by case law allowing holidays to be carried forward if they could not be taken as a result of taking family leave or sickness absence.

In King, the Court of Justice of the European Union (CJEU) has added another exception to Regulation 13(9) – that a worker who is unable to exercise his/her right to paid holiday due to issues beyond his/her control may carry forward their holidays.  As a ‘worker’, Mr King was found to be entitled to holiday pay from 1999 to 2012.  As he had not been permitted to take paid holiday, the fact that he (for the most part) did not seek to take holiday did not adversely affect his claim.

This case follows the well-established trend of the CJEU maximising the protection given to workers’ entitlement to leave, including ‘normal remuneration’ during periods of leave.  This is not surprising as the primary purpose of the European Working Time Directive is the protection of health and safety, with a focus on the worker’s need ‘to fully benefit from that leave as a period of relaxation and leisure’.

In recent years, UK workers’ rights to make holiday pay claims have been restricted in two key ways.  In November 2014 in Bear Scotland v Fulton, the Employment Appeal Tribunal limited how far back in time workers could go with their claims by holding that if there is a gap of 3 months or more in the series of deductions, the claim could not bridge that gap.  The Deduction from Wages (Limitation) Regulations 2014 limited the scope of historic holiday claims presented to the Tribunal on or after 1 July 2015 to the period of two years preceding the presentation of the claim.  The lawfulness of both of these restrictions has been called into question following the CJEU’s decision in King.

The greatest risk now is for organisations who have engaged ‘self-employed’ individuals (think Uber, etc) who are regarded as ‘self-employed’, but who subsequently successfully argue that they are properly regarded as ‘workers’.   Although this judgment relates only to the 20 days’ holiday per year granted by the European Working Time Directive, this could prove very costly for those who have engaged numerous and/or long serving ‘workers’.

Also, whilst this case concerned an individual whose holidays were unpaid, there is no reason why the same principles cannot be applied to those who received pay that fell short of their ‘normal remuneration’ for periods of holiday.  We may well see a resurgence in relatively low value holiday pay claims, particularly as Tribunal fees are no longer an issue.

The CJEU’s decision doesn’t mean that individuals who are already accepted to be ‘employees’ or ‘workers’ can omit to take their holiday and carry it forward for ever more.  But, where obstacles are put in the way of individuals exercising their right to take leave, employers beware!

For advice on holiday pay, employment status or any other aspect of employment law, please contact Sheila Shaw at Analysis Legal LLP – or 07419 730 920.

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