Case update (1): Holiday pay – un-used but not lost

Summary: Should a worker who is unable or unwilling to take holiday due to reasons beyond their control (extending beyond sickness) be allowed to carry over the holiday and be paid in lieu on termination of employment?

Yes, says the EAT in The Sash Window Workshop Limited v King 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 upheld his claim and the employer appealed.

The EAT allowed the employer’s appeal. It decided that the Tribunal had not asked the essential question of whether Mr King “had been prevented by circumstances beyond his control” from taking paid leave. Of most interest to employers is the EAT’s apparent acceptance of the Tribunal’s finding that the carry forward of holiday could potentially apply in non-sickness cases.

The July 2012 decision of NHS v Larner clarified that employers should allow a worker to carry over their accrued holiday if they have been on long-term sick leave and have not had the opportunity to take that holiday. The effect was to disapply the “use it or lose it” presumption in sickness absence cases. The Sash Window Workshop Ltd v King suggests that this disapplication could be extended to cases where a worker is unable or unwilling to take holiday because he was on sick leave or “because of reasons beyond his control”.

The EAT said that the Tribunal should have assessed what would have happened if the worker had asked for leave – i.e. was he prevented from exercising his right, or did he merely choose not to do so?

The EAT also held that the claim was one for damages for refusal to allow the worker to exercise his right to annual leave, not an unlawful deductions for wages claim based on non-payment of holiday pay.

Implications:

The “use it or lose it” presumption for holiday has become less certain. Before committing unused holiday to the bin, employers should consider whether members of staff have been prevented from taking such holiday due to sickness or “because of reasons beyond [their] control”.

The interpretation of “reasons beyond [their] control” leaves open some interesting questions such as family emergencies or even holiday clashes with a spouse. The advice has to be that HR departments and line managers should ensure that all staff “use it” and are taking holiday throughout the holiday year and do not allow problems to build up.