The Claimant was engaged as a plumbing and heating engineer from 2005 to 2011. Since he was hired as an independent contractor, he was not entitled to paid holidays. The Claimant did take some unpaid leave. When the Claimant was terminated, he made various claims to the Tribunal. He was successful in arguing that his employment status was that of a worker rather than an independent contractor and as such was entitled to holidays. He then brought a claim relating to unpaid holidays.
The Claimant’s holiday claim was initially unsuccessful as it was out of time. The interpretation of the case King v Sash Windows was pivotal in this decision. That case concluded that if a worker is being refused holiday pay by their employer they will continue to accrue and be able to carry over their holiday entitlement until the contract is terminated. But the Tribunal held that this case did not apply to the Claimant’s position as he had actually taken the time off whereas in the Sash case the Claimant, knowing they would not be paid, did not do so.
Employment Appeal Tribunal
The Claimant appealed stating that the Sash case had not been interpreted correctly and the claim was not out of time. The Appeal Tribunal disagreed with that argument, stating that Sash was not about being able to carry over leave that had actually been taken, though unpaid. It related to holidays that were not taken because of the employer’s refusal to pay.
Court of Appeal
The Claimant appealed again and this time was successful. LJ Simler stated “If a worker takes unpaid leave when the employer disputes the right and refuses to pay for the leave, the worker is not exercising the right. Although domestic legislation can provide for the loss of the right at the end of each leave year, to lose it, the worker must actually have had the opportunity to exercise the right”.
In order for annual leave to be lost at the end of a holiday year the employer must be able to prove that the right to leave was offered “specifically” and “transparently”, that workers were encouraged to take leave and informed that unused leave would not be carried over at the end of the holiday year.
If the employer cannot demonstrate this then the unused holidays will not be lost and will carry over and continue to accrue until the contract is terminated. At this stage the worker will be entitled to a payment of the value of the untaken leave.
What does this mean for employers?
This case will have a big impact on employers. Workers have the right to be compensated for untaken leave and they will now additionally have the right to be compensated for leave that was taken but not paid for. It is important to note that this is only applicable to the right to take 4 weeks of annual leave as set out by the Working Time Directive. Regardless, employers will need to be very cautious when assessing worker status as errors have the potential to be very costly.
If you have any questions on any of the issues mentioned in the above article, please contact Natalia Milne.