HR MATTERS Take it or leave it Gareth Edwards gives some insight into new holiday pay case law THE Working Time Regulations 1998 set out workers’ rights to paid annual leave and in a landmark ruling by the European Court of Justice (ECJ) late last year, UK law has been found to be incompatible with EU legislation. In essence, the ECJ has confirmed that where a worker is refused their paid annual holiday, their entitlement to paid annual leave will carry over to the next holiday year. The case, King v The Sash Windows Workshop Limited, was brought by Conley King, who was engaged by The Sash Window Workshop Limited (SSW) from June 1999 until October 2012 as a self-employed commission only salesman. Mr King’s contract made no reference to the issue of annual leave and throughout his time at SSW Mr King had not taken any paid holiday. Over the period that he was engaged by SSW to provide it with services, he was offered an employment contract however he turned this down, choosing instead to remain self-employed. Following the end of the relationship, Mr King brought a claim for unpaid holiday pay in the Employment Tribunal (ET) pursuing 24.15 weeks’ pay. SSW opposed this claim, arguing that the Working Time Regulations 1998 state that if paid holiday is not taken in a leave year, then it is lost and cannot be carried over. The ET found that Mr King was a ‘worker’ which entitled him to paid annual leave. A number of appeals then followed the initial decision with the case making its way to the Court of Appeal (CA) before being referred to the ECJ regarding the question of holiday pay entitlement. ECJ’s JUDGMENT The ECJ noted that SSW had benefitted from Mr King not taking the annual leave that he, as a worker, had been entitled to and went on to say that denying workers their holiday pay effectively prevents them from exercising their right to paid annual leave. In addition, the ECJ said that a claim for accrued annual leave entitlement cannot be prevented because another holiday year has started, and that this principle was incompatible with EU law. Crucially, the ECJ said that the normal time limits concerning how much holiday can be carried over do not apply when an organisation has failed to grant paid annual leave to their workers. This means that a worker could be AUTHOR – Gareth Edwards entitled to claim the accrued, but unused, holiday entitlement when their appointment ends. Further, they can claim compensation for the leave that they decided not to take because that leave would be unpaid. THE IMPACT This decision has potentially far reaching consequences for businesses who engage workers – particularly when read alongside the recent decisions in the so called ‘gig economy’ involving the likes of Uber, CitySprint and Addison Lee. It is clear that the decision in this case could result in significant liabilities for organisations operating in the gig economy. While the ruling only applies to the first four weeks of annual leave entitlement required under the relevant EU legislation, rather than all 5.6 weeks of UK holiday, businesses could face substantial bills if they need to pay several workers for several years of unpaid annual leave on the termination of their engagement. In the meantime, the case has been referred back to the Court of Appeal who will need to determine how UK legislation is to be interpreted in line with this recent decision. For the moment, firms should remain alert to this decision and keep track of its progression. It was made clear by the ECJ that it is the responsibility of the organisation to understand its obligations and that it is irrelevant if it wrongly considers a worker not to be entitled to annual leave because of a misunderstanding of their status. Significantly, where an organisation does not allow workers to exercise their right to paid annual leave then it is for that business to bear the consequences, and potential costs, of accrued but unused holiday pay. In light of this decision, this means looking carefully at those individuals engaged on a self-employed basis such as those individuals who provide their services through the gig economy. The direction of travel in some of the cases above creates a risk that individuals engaged on a contractor basis can argue that they were actually workers; they could argue that they should receive back holiday pay in respect to holiday that they were unable to take. This gives the risk of an individual being found to be a worker’s real teeth; Conley King was able to recover 13 years’ worth of untaken annual leave entitlement. Gareth Edwards is a partner in the employment team at Veale Wasbrough Vizards. gedwards@ vwv.co.uk The Recognised Standard / www.cicm.com / <strong>March</strong> <strong>2018</strong> / PAGE 68
The Recognised Standard / www.cicm.com / <strong>March</strong> <strong>2018</strong> / PAGE 69
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