December 13, 2017

Holiday pay case a game-changer

This post was written by: Ilinca Mardarescu

Holiday pay case a game-changer

A recent decision in The Court of Justice of the European Union (CJEU) in the case of King v Sash Windows Workshop is a potential game-changer – and should worry all business – big and small.

The case involved Mr King who was a commission-only self-employed salesman. Interestingly, he had even been offered an employment contract a while ago but had declined it. Despite this, when the relationship turned sour Mr King challenged his position and made a number of claims against Sash Window including one for unlawful deduction of wages in respect of holiday pay. He stated that he had never taken his full holiday entitlement as he could not afford too due to the fact it was unpaid. The position had always been that he was not paid holiday pay on the presumption that he was self-employed. As it turned out, the Employment Tribunal disagreed and found he was a “worker” for the purposes of Working Time legislation.

The case ended up at the CJEU who have made it clear that it is the employer’s job to ensure it is meeting all of its obligations in relation to any relevant legislation – ignorance is no defence. It also clarified that workers who are denied their entitlement to holiday pay do not have to actually take a period of (unpaid) leave before making a claim as that would potentially penalise employees and cause them to suffer financial hardship. Instead, workers can make a claim for untaken leave on termination. This in effect circumnavigates any limitation period and enables workers to backdate their claims for a number of years. Indeed, Mr King’s claim was for 13 years of unpaid holiday pay.

For companies that rely on the “self-employed” this case could have an enormous financial impact due to the number of years a worker can go back. It may also be that the Employment Appeal Tribunals’ decision earlier this year in Bear Scotland (which stated that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments) may well need revising.

Precisely how the unpaid leave will be calculated is not yet clear (where a worker does not take the holiday due to it being unpaid but instead works and therefore earns whilst working; how would the resulting loss be calculated?). The case has now been remitted to the Court of Appeal where it is hoped we will find out more. But the case will have a significant impact not only on Uber and others in the “gig economy” but for smaller businesses too.