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Workers denied paid holiday can carry over rights indefinitely until termination

View profile for Justin Terry

The European Court of Justice (“ECJ”) has held that a worker who had been misclassified as a self-employed contractor and discouraged from taking holiday because it was unpaid, was entitled to claim unpaid holiday for the duration of his engagement.

Background - annual leave rights

Under Regulation 13(9) of the Working Time Regulations 1998 (“WTR”), a worker’s annual leave entitlement must be taken in the leave year in which it is due (unless prevented by ill health or family leave) and cannot be replaced by a payment in lieu except on termination of employment.

A number of cases have seen the UK’s WTR provisions challenged in various ways as being incompatible with the EU law. As a result, we have seen an expansion of workers’ holiday rights, particularly in relation to workers who are off sick -  who are now able to carry over leave they were unable to take due to ill-health up to a period of 15 months.

The latest case

This latest case deals with the rights of an individual who was classed as self-employed, and therefore was not granted paid holiday, but was later found to have been a worker with accompanying rights to paid holiday.

Mr King started working for Sash Window Workshop Ltd (“SWW”) as a self-employed salesman in 1999. As such, he had no contractual right to paid holiday. SWW terminated Mr King’s services in 2012 and he brought an Employment Tribunal claim for unlawful deductions from his wages in respect of holiday pay. Mr King argued that he was a worker and had not taken annual leave each year because it would have been unpaid.

The Employment Tribunal agreed that Mr King had been a worker and also awarded him holiday pay for (a) accrued but unused holiday in his final year of work, (b) unpaid holiday taken in previous years and (c) accrued but untaken holiday in previous years. Over the course of the case a number of questions were appealed to the ECJ, including whether a worker who does not take holiday because their employer will not pay for it can carry over that holiday and, if so, can they do so indefinitely?

The ECJ held that a worker who does not take holiday because their employer won’t pay for it should not be prevented from claiming holiday pay just because the holiday year had lapsed.  Further, the normal limits to the carry over of holiday should not apply to the benefit of that employer – in other words the worker can claim for accrued but unused holiday in this context indefinitely.  

Comment: This decision could have a significant impact on employers who have misclassified workers as being self-employed contractors. Note that the ECJ had no sympathy with the possibility that SWW had believed Mr King was genuinely self-employed, suggesting that it was an employer’s responsibility for informing themselves in this regard. This case could result in large amounts of unpaid holiday being made on termination, not only in relation to final year of work, but potentially in relation to holiday that a worker had previously been discouraged from taking because it would not be paid.

See the full case here.