Will carry over of leave be extended?
The ECJ is considering whether workers can carry over holiday that they have been prevented from taking when they are mistakenly classed as self-employed. It is already an established principle that a worker who cannot take holiday leave because they are sick can carry over the first four weeks of their annual leave entitlement for a maximum of 18 months after the end of the leave year.
In King v The Sash Window Workshop Ltd and anor, the employee was engaged as a self-employed salesman for 13 years. He was paid commission only and he took different amounts of holiday each year. This holiday was unpaid because both King and the employer believed he was self-employed and, therefore, not entitled to holiday pay. King’s contract was terminated in 2012 and he claimed holiday pay and pay in lieu of accrued but untaken holiday for the whole of his engagement.
The employment tribunal found that both parties had genuinely mistaken the employment status of King. He was a worker and entitled to paid annual leave. He was awarded pay for holiday accrued but untaken for the final leave year, pay for leave taken in previous years as a series of unlawful deductions from wages and pay in lieu of accrued but untaken leave for his 13 years of service.
The employer challenged the award for accrued but untaken holiday leave spanning the whole of his engagement on the grounds he had failed to exercise his right to take leave during the holiday years so he could not carry this over. The Employment Appeal Tribunal decided that a worker can carry over leave in circumstances when they are unable to take their holiday for reasons beyond their control, not just sickness. The case was sent back to the employment tribunal to determine whether King was unable to take holiday for a reason outside his control.
The employer appealed and the Court of Appeal made reference to the ECJ to answer key issues including whether a worker can carry over leave if they are prevented from exercising their right and, if so, is this carry over indefinite or for a limited period of time.
Why is this case important?
The issues concern a previously untested area. Clarity is needed because the final decision will have a significant impact on all employers:
- If the ECJ decides that workers can carry over leave where they are unable to take it for reasons other than sickness, employers will face a large administrative, absence management and financial burden. It will also lead to a further period of uncertainty as to what is classed as a reason beyond the workers control.
- The decision will be significant where the status of the individual is disputed, especially where this is due to a genuine mistake as in this case. Where the parties are mistakenly classing the individual as self-employed but later down the line a dispute is raised and a tribunal finds they are a worker, for example, the employer will face a significant compensation claim for holiday pay, even if a carryover limit is applied. The huge number of status cases and ‘gig economy’ cases going through the system shows how significant this issue could be.
- The decision of the court is expected to be handed down whilst the UK is still a member of the European Union so will be binding on UK courts and tribunals. The Working Time Regulations are an area which is viewed as likely to be amended in the future but, for now, the impact of this case is substantial.