No right to holiday carry over for workers where the holiday has already been taken as unpaid leave

The Employment Appeal Tribunal has ruled that there is no right of holiday carry over for workers where the holiday has already been taken as unpaid leave. In this long-running ‘employment status’ case, which reached the Supreme Court in 2018, the Claimant, a plumbing and heating engineer, worked for Pimlico Plumbers (the Respondent) for approximately 6 years, during which time the Respondent maintained that the Claimant was a self-employed independent contractor, without entitlement to paid holiday. When the Respondent suspended the Claimant, and required him to return equipment and a van, the Claimant regarded this as a fundamental breach entitling him to terminate the contract. The Claimant brought a claim for holiday pay which he had never received due to the Respondent treating him as a self-employed contractor without rights to paid holiday. 

Overcoming the first hurdle in establishing he was a ‘worker’ rather than self-employed and so was entitled to statutory holiday under the Working Time Regulations 1998 and so could claim holiday pay, the Tribunal decided that he was worker of the Respondent, such that his claims could proceed. Its decision regarding employment status was upheld by the Employment Appeal Tribunal, Court of Appeal and Supreme Court. 

In order to determine the next stages of his claim, i.e. how much compensation he was entitled to, the case was sent back down to the Employment tribunal to determine this.  Following years of litigation, in 2019, the Employment Tribunal dismissed his holiday pay claim for being out of time on the basis that, although he was a worker and was entitled to holiday pay, the claims had been brought outside the statutory 3-month time limit that applies for bringing a claim for unpaid holiday from the date of non-payment. 

The Claimant appealed against the dismissal of his holiday pay claim arguing that the Employment Tribunal should have followed the European decision in King v Sash Window Workshop [2018] IRLR 142 (C-214/16).  This case ruled that workers who have been denied the opportunity to take holiday (due to incorrectly treating them as self-employed), can carry over their holiday entitlement until the end of their employment and are entitled to payment in lieu of accrued but untaken holiday on termination of their employment. The Claimant argued that this case applied to his circumstance as he was unaware of his right to take paid holiday under the Working Time Regulations 1998 (WTR), the holiday that he did in fact take was not taken in exercise of his rights under the WTR, as it was not paid. The Tribunal disagreed, stating that the case of King only applied to holiday not actually taken on the basis that it would not be paid for i.e. where the worker was deterred from taking holiday on this basis and therefore deprived of a remedy for claiming holiday pay under the WTR (as this required holiday to be taken).   The Claimant was not in that situation – having taken holiday (albeit unpaid) he was entitled to bring a claim for payment under the WTR. The Claimant did not present any evidence that he was deterred from taking holiday on the basis that it wouldn’t be paid.  On the Claimant’s own evidence he took holiday in most if not all the years of his employment.  He therefore was not deprived of a legal remedy; he had simply failed to lodge his claim on time.

The Claimant appealed to the Employment Appeal Tribunal (EAT).  The issue to be determined by the EAT was whether or not he was entitled to carry over his unpaid holiday for each year of his employment under the WTR. If he was, the unpaid holiday pay would be payable on termination of his employment and would thus mean that the 3-month time limit would run from this point, and not from the point at which the payment ought to have been made by his employer. It would mean he could also circumvent the 2-year limitation period introduced under the Deduction from Wages (Limitation) Regulations 2014, which impose a 2-year limit on claiming holiday pay as an unlawful deduction from wages claim.

The EAT’s Decision

Dismissing the appeal, The EAT agreed with the Employment Tribunal. They concluded that the ruling in King did not mean that a worker who takes unpaid leave should be considered to have not taken their annual leave under the Working Time Directive. Logically, it was not possible to say you had been deterred from taking holiday you had actually taken. The focus in King was on situations where a worker declined to take holiday as a result of the uncertainty as to whether it would be paid. 

Comment

All workers are entitled to be paid for any accrued but untaken statutory holiday on termination of their employment. This case usefully confirms and provides certainty for employers facing potential holiday pay claims due to misconstruing a  worker’s true employment status and incorrectly treating them as self-employed, that the right to carry over holiday until the termination of employment where the employer incorrectly classifies the worker’s true employment status, as established in European caselaw, does not apply where the worker actually takes the holiday, albeit the holiday is unpaid. In that case, the worker must still bring a claim for holiday pay within the correct time limits i.e. 3 months from the date of the last deduction (i.e. failure to pay holiday pay) or last in a series of deductions.  In that case, employment law provides that there is a 2-year limit on claiming holiday pay in an employment tribunal as an unlawful deduction from wages claim, so that a claim for unpaid holiday cannot go back further than 2 years.  

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