Unpaid Holiday Pay Claims – One Worker's Battle
The Law Of… Getting Paid Fairly
Joy Drummond, Partner in Employment Law, explains why the recent decision by the Court of Justice European Union (CJEU) which allowed for a salesman to claim back 13 years of unused holiday in payment is important.
The decision in this landmark case could mean changes to UK law so that any worker who does not receive the paid holiday due can claim back payment for this at a later date, free of previous time limit restrictions.
Background To The Case
In June 1999, Mr King started working as a salesman for Sash Window Workshop (SWW). He was paid on a commission-only basis and didn't have the contractual right to receive paid holiday.
In 2008, Mr King was offered a contract of employment by SWW, which included the right to receive paid holiday but he didn't accept it. He continued working for the company up until October 2012, when he was dismissed. After leaving the business, he then made a claim for holiday pay, as well as other claims.
An Employment Tribunal concluded that Mr King was a 'worker' under the Working Time Regulations 1998 and it found that he was entitled to holiday pay, as a series of unlawful deductions from wages.
Unhappy with the Tribunal's decision that Mr King was entitled to holiday pay for all leave to which he had been entitled while working for SWW, but had not taken (as it was unpaid), SWW appealed the case to the Employment Appeal Tribunal (EAT). The EAT sent the case back to the Employment Tribunal for reconsideration, including on the question of whether Mr King had been prevented “for reasons beyond his control” from taking his leave.
An appeal was made by Mr King to the Court of Appeal, which then asked for clarification on several issues of EU law from the European Court of Justice (CJEU). The Advocate General submitted his opinion back in July of this year, and now a decision has been reached by the CJEU.
After lengthy proceedings, the CJEU decided that UK law could not prevent workers in Mr King’s position from carrying over his untaken holiday and being paid for it when he leaves. This means it can now go to the UK Court of Appeal for a further ruling, taking this into account. This decision sets the precedent that a worker doesn’t have to take leave before it is clear that he will be paid for it, and that a worker is entitled to claim this back after employment has ended regardless of time elapsed.
Denying Billions Of Workers Holiday Pay
Unpaid holiday pay is a serious issue within the UK.
A Trust for London report recently revealed that:
- £1.5billion in holiday pay remains unpaid every year
- 1 in 20 workers don't get paid holidays, which is unlawful
There has also been a substantial drop in unlawful wage deduction claims since the issue fee of £160 was introduced. With this recent decision however, we can expect more claims to come about in an attempt to rectify this.
How Has This Decision Changed Things?
Mr King's case shows that it's possible that the right to a backdated payment for holiday pay could arise when the employment ends, going back very many years, even where the holiday has not been taken or even requested.
In his opinion in C. King v The Sash Window Workshop Ltd Case C-214/16, the Advocate General says that if a worker does not take all or some of the annual leave to which they are entitled in the leave year when it falls due to be taken, because the employer refuses to pay them for any holiday they take, the worker can claim that they are prevented from exercising their right to paid leave.
Also, this right carries over until the worker is allowed to take the paid leave or their employment comes to an end. On the termination of their employment they are entitled to pay in lieu of all the paid annual leave that has not been taken for this reason up until that date.
In his earlier Opinion, the Advocate General stated that employers have to provide an "adequate facility" for their workers to be able to use their right to paid annual leave (which falls under the EU Working Time Directive).
Employers who have categorised their workers as self-employed in order to reduce their expenses (by, among other things, not paying holiday pay) could find themselves at the receiving end of multiple claims for back pay.
The CJEU decision in King v the Sash Window Workshop Ltd Case C-214/16, goes further in favour of the workers than the Advocate General’s Opinion, and has decided that workers not offered paid holiday are able to:
- Claim holiday pay due. Workers do not have to take leave in the uncertainty as to whether they will be paid for it, or will not be able to claim the holiday pay due at a later date. They can also claim holiday pay for leave they didn’t take while it was unclear if they would be paid for it.
- Carry over untaken leave to later years without a time limit on how long they can carry it over for.
- At the end of employment claim pay in lieu of all the untaken holiday not taken in earlier years because the employer refused to pay for that leave.
The CJEU also said that the 15 month limit allowed on carrying over leave due to sickness did not apply to cases where leave was not taken because it was not certain it would be paid for. This is because a worker faced with uncertainty about what he will be paid while on holiday will not be able to fully benefit from that leave as a period of relaxation and leisure, as was intended, and is likely to be dissuaded from taking it.
Also, the employer would have benefited for the worker not taking the leave and it was up to the employer to inform itself of its obligations and bear the consequences if they did not offer paid leave when they should have.
What Does This Decision Mean For UK Law?
This decision raises many questions under UK law, many of which we may not have clear cut answers to until more cases like Mr. King's progress through court.
These questions include:
- Can workers who did not take leave because they were not told they would be paid for it, now take all the leave carried over and be paid for it while still employed?
- If the worker takes that carried over leave now, and is not paid for it, does he have a claim for non-payment only arising now, so overcoming the time limits under the Working Time Regulations, the Deduction from Wages (Limitation) Regulations and the Employment Appeal Tribunal decision in Bear Scotland and others v Fulton and others 2015 ICR 221, even if he is still working for the employer?
- Where the employer only offered holiday pay at an inadequate rate (for example not including variable pay) and the worker did not take all his leave due to the loss in income, can the worker carry over all the untaken leave and take it now and claim payment now in time as during employment payment is only due when the leave is taken?
- Can he also claim for pay in lieu of the untaken leave at the full rate at the end of employment?
- Should there be a distinction in principle for the case where the worker took leave in earlier years but was underpaid for it, or should he also be able to claim for all the underpayments on the termination of employment claim, despite the time limits referred to above on the grounds that although the worker took the leave he was prevented from taking paid leave at the proper rate?
- If a worker is able to claim for all underpayments of holiday on the termination of employment, why in principle should he not be able to claim for all the underpayments of holiday pay while still employed, despite the current UK time limits?
To achieve consistency across all cases of underpayment of wages the current UK time limits would have to be changed in UK law. Pressure for this will increase as more cases like Mr. King's progress through tribunals and courts.
James Williams, a barrister at Henderson Chambers who is representing Mr King pro bono (instructed by Goodman Derrick), said that the decision "Left employers who have miscategorised workers as self-employed, liable for back holiday pay when the workers' employment is terminated."
During the case itself, he commented: "If the Advocate General’s opinion is followed by the Court, businesses may face a large number of claims by any classified as self-employed seeking to argue that they are actually workers and thus entitled to holiday pay dating back to 1998. Employers who have been complying with their obligations to offer paid leave to all workers under the Working Time Regulations should not be affected, provided that the pay offered during leave was equivalent to the pay the worker would have received when at work."
"The CJEU’s (formerly the ECJ) decision today in King v The Sash Window Workshop Ltd that a worker doesn’t have to take leave before it is clear that he will be paid for it, and that workers not offered paid holiday can carry over untaken leave to later years and be paid for it at the end of the employment, has very wide consequences."
"Those who thought they were not getting paid holiday because their employers wrongly treated them as self-employed, and arguably all workers not offered paid holiday at the proper rate, can now carry over untaken leave to later years and claim pay for untaken leave at the end of their employment."
Do You Have Un-taken Holiday You Require Payment For?
If you are in a similar situation, contact one of our employment law solicitors today. They can make you aware of your options and the possible outcomes. Get in touch using our Freephone number, or through our online enquiry form.