Unpaid holidays can be carried over indefinitely

The recent case to pass through the employment tribunal system involving Smith v Pimlico Plumbers Ltd is the latest in a long-standing saga. The parties appeared at the UK Supreme Court in 2018 to determine the employment status of those engaged by Pimlico Plumbers, after a claim journey spanning 7 years had climbed through the lower tribunals. The respondent believed anyone who provided services did so on a self-employed basis, however, it was later confirmed by the Supreme Court that they were entitled to worker status.

This ruling raised new opportunities for workers to make further claims against the organisation for entitlements they should have been given throughout the course of their employment. This includes the right for workers to be given at least the minimum paid annual leave entitlement of 5.6 weeks.

Smith had taken annual leave whilst he was engaged by the company but was not, under self-employed status, entitled to any pay for his time off. Following the ruling that he indeed should have had worker status, he pursued a separate claim through the Employment Tribunal (ET) for pay for this holiday time.

The ET dismissed the claim on the principle that it was brought almost 3 months out of time; this date was based on the last date on which he should have been paid for his holiday (5 February 2011) as opposed to the date his employment contract ended (3 May 2011). Smith relied on previous case law (King v Sash Window Workshop) to determine the time limit. However, the ET rejected the comparison since in the King case, the worker had not taken any annual leave at all.

Smith appealed to the Employment Appeal Tribunal (EAT) who also dismissed his claim, finding that the tribunal had not erred in its interpretation of the law and previous case law. The EAT agreed that the King case was not concerned with leave that was taken but unpaid, as per Smith’s.

Unsatisfied with the outcome, Smith appealed again to the Court of Appeal. This time, his claim succeeded. It was found that the claim was for the breach of Smith’s statutory entitlement as a worker to four weeks paid annual leave under the European Working Time Directive (EWTD). Since Pimlico had previously regarded him as a self-employed contractor, they failed to acknowledge this statutory entitlement. As such, this right to paid annual leave accumulated and carried over throughout the duration of his employment meaning he was entitled to payment for all accrued but unpaid EWTD annual leave at the point of termination.

This judgement could bring significant liabilities for UK employers, especially if they have engaged individuals under the wrong employment status, so denied them access to paid annual leave. As such, the case highlights the importance of both making sure the correct status applies and to remind, encourage and facilitate staff to utilise their holiday entitlement, and inform them that it may be lost if they don’t.

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