Employment Law Bulletin January 2018

It’s pay-back time…Court upholds claim for 13 years of unpaid holiday pay

The Court of Justice of the European Union (“CJEU”) has ruled that a worker is entitled to recover holiday pay dating back 13 years, where he was denied the opportunity to take paid annual leave by his employer.

Mr King was engaged to work for Sash Window Workshop (“SWW”) as a self-employed salesman on a commission-only basis from 1999 to 2012. Under his contract, he was not entitled to paid annual leave. Upon his dismissal from SWW in 2012, Mr King raised a number of claims in the Employment Tribunal.

The Tribunal found that Mr King was a worker and not self-employed. This entitled him to pay in lieu of untaken annual leave. The big question though, was how far back Mr King could go when claiming pay in lieu of untaken annual leave.

Under Article 7 of the EU’s Working Time Directive, workers are entitled to at least 4 weeks’ annual leave. SWW argued that Mr King was time-barred from bringing a backdated claim for pay in lieu of annual leave, as the UK’s Working Time Regulations (“WTR”) requires leave to be taken in the leave year in which it accrues.  Mr King argued that his entitlement to unpaid leave arose on the termination of his engagement with SWW, meaning that he was not time-barred.

This issue of whether Mr King could recover pay in lieu of accrued but historical untaken annual leave between 1999 and 2012 was referred to the Court of Appeal who in turn referred the following questions to the CJEU:

  1. is the requirement for a worker to take unpaid leave first, before establishing that they are entitled to be paid for it, consistent with EU law?
  2. where a worker does not take annual leave on the basis that their employer refuses to pay them for it, is that worker entitled to carry over their entitlement to annual leave? and
  3. are any time limits applied to this carry-over (e.g. the WTR stating that leave must be taken in the year in which it accrues) compatible with EU law?

The CJEU found that:

  1. it is not necessary for the worker to take unpaid leave in the first instance, to establish that they are entitled to be paid for that leave;
  2. where an employer has refused a worker the right to paid leave, the worker shall be entitled to carry over from year to year and where appropriate, accumulate their entitlement to paid leave; and
  3. if local laws (such as the WTR) try to limit how far back workers can go when claiming backdated holiday pay in this situation, then such laws are not compatible with EU law (and EU law takes precedence).

Mr King will now be entitled to recover pay in lieu of annual leave going back 13 years (1999 – 2012). The decision suggests that workers may be entitled to claim back accrued unpaid leave until 1996 (when the Working Time Directive came into force). This could have a significant and costly impact on businesses in the UK that have categorised workers, incorrectly, as self-employed contractors.