Can your workers carry over unlimited holidays?
David Clay reports on a European case which could trigger a new wave of holiday pay litigation by individuals claiming worker status.
All workers in the UK are entitled to 5.6 weeks’ paid holiday each year, comprised of 4 weeks’ holiday derived from the EU’s Working Time Directive and a further 1.6 weeks’ holiday under the UK’s Working Time Regulations. In a recent case, the European Court of Justice (ECJ) has clarified a worker’s right to carry over holiday and claim holiday pay where he has been deterred from taking his holiday.
The case concerned Mr King, who purportedly worked on a self-employed commission-only basis for the Sash Window Workshop (SWW) from 1999 to 2012. Mr King’s contract was silent on holiday entitlement and when he did take holiday it was unpaid. On the termination of his contract, Mr King argued he was a worker and entitled to holiday pay. He brought a claim for holiday pay (in respect of both holiday taken and not paid, and holiday not taken at all) covering the entire period of his engagement by SWW.
After a referral was made by the Court of Appeal, the ECJ held that where a worker does not take holiday because he understands it will not be paid then he is entitled to carry over all such holiday accrued throughout his engagement and receive a payment in lieu of this holiday on termination. In respect of Mr King, this was the case even where he had not asked to take leave. The ECJ also noted that the manner in which the UK’s Regulations implement the EU Directive means workers must take unpaid leave and then later bring a claim to recover payment for that leave; this was incompatible with the rights afforded by the EU Directive and the right to an effective remedy under the EU Charter of Fundamental Rights.
This decision will only apply to the 4 weeks’ annual holiday derived from the EU Directive, but could still have substantial implications for employers. Essentially, it establishes that workers could potentially recover decades of unpaid holiday if they have been deterred from taking holiday by their employer. Given the recent trend towards individuals in the ‘gig economy’ establishing worker status, the decision places businesses which rely heavily on engaging individuals as independent contractors at particular risk of claims. Employers should carefully review their existing holiday pay arrangements and take advice on how to address any potential liabilities.