Case Update (1): Annual Leave and employment status

Summary:  Should a worker, misclassified as a self-employed consultant with no facility to take statutory paid holiday, be entitled to carry over the untaken holiday and be paid in lieu on termination of employment?

Yes, is the Advocate General’s Opinion in King v The Sash Window Workshop Limited available here.

 

Facts:  The worker, Mr King, was a commission-only salesman who was engaged by the employer, The Sash Window Workshop, from 1999 until his dismissal in 2012. He had taken time away from work each year but was not paid for any holiday. He claimed that he would have taken more time off if it had not been for the fact that (1) he had to give notice to ensure there were not too many salesman away at one time (2) if he did not work he did not get commission and (3) he was unaware of his entitlement to holiday pay.

Mr King brought a claim for unpaid holiday pay for the duration of his employment.

The Tribunal agreed that Mr King was a worker rather than being truly self-employed and upheld his claims. It agreed that Mr King should be paid for i) accrued but untaken leave from his final year of work; ii) the period of leave that he actually took during the time he worked for Sash Windows; and iii) the leave that he was entitled to take whilst working for Sash Windows, even though he did not in fact take it.

Sash Windows objected to the third finding; that Mr King should be paid for leave that he did not even try to take and appealed. The Employment Appeal Tribunal agreed with Sash Windows and effectively decided that a worker would first have to take unpaid leave; and only after having done so, could the worker test whether he would be entitled to be paid.

Mr King appealed again and the Court of Appeal referred both this question and the question of what leave can be carried forward and what compensation can be sought, to the Advocate General and CJEU.

The Advocate General decided that the EAT’s approach effectively put the onus on a worker to take steps to create an adequate opportunity before they could take paid annual leave. In his view was this was the wrong approach. It would be an unlawful pre-condition to impose on workers trying to take paid annual leave; and under EU law employers are legally bound to provide ‘adequate facilities’ to workers to allow them to exercise their rights to take paid holiday.

Provision of an adequate facility might be specific contractual terms conferring the right to paid leave or the establishment of a legally enforceable administrative procedure through which an application could be made to employers by workers. Only once the facility has been provided, can any restrictions on the exercise of the right to leave begin to apply.

The Advocate General noted that holiday pay cases which addressed whether the worker actually had the opportunity to exercise the right to paid annual leave were irrelevant when considering this case because the essence of the right was in issue as there was no facility within the employment relationship for the exercise of the right in the first place.

In light of the above, unless Mr King’s offer letter was found to provide evidence of Sash Windows offering him adequate facility to take paid annual leave (a question for the Court of Appeal) then Mr King was entitled to receive payment for holiday that he had not taken in respect of the whole period that he worked for Sash Windows.

 

Implications: If the Advocate General’s Opinion is followed by the ECJ, it will extend employers’ liabilities in a new direction by requiring that they must provide an “adequate facility” for workers to exercise their right to paid leave.

If an employer does not provide such a facility, its workers will not lose their right to paid holiday simply because they have not sought to take it. They will be able to carry their entitlement forward into subsequent holiday years. On termination of employment, the employer will have to pay in lieu of a worker’s untaken leave for the whole period during which no such facility existed.

Gig-economy employers in particular should take careful note of this decision – if it’s followed by the CJEU, it could result in employers being required to pay out significant sums in holiday pay, both for the periods of leave that their workers take during their contracts and for any leave that’s accrued but untaken on termination.

However, it is worth noting that if the contract with Sash Windows had provided for Mr King to take paid holiday, but he had chosen not to take it, then the outcome would be very different as it is unlikely that he would then be entitled to payment in respect of his holiday for the entirety of his engagement with Sash Windows.