The European Court of Justice (ECJ) has ruled in favour of a gig economy worker who did not have a paid holiday in 13 years.
Today’s decision in the case of Mr C. King v The Sash Window Workshop Ltd & Richard Dollar (Case C‑214/16) has huge implications for the gig economy, say employment solicitors. It leaves employers, who have miscategorised workers as self-employed, liable for back holiday pay when the workers’ employment is terminated.
You can read the ruling here. Got a comment? Please let us know what you think in the comments below.
Clare Gilroy-Scott, partner at Goodman Derrick LLP who represented Mr King, says:
“This case is of importance in clarifying that workers who are denied their entitlement under the Working Time Regulations to paid annual leave do not have to take a period of unpaid leave first before taking legal action to receive pay for that leave. This would otherwise have left a worker (who was without protection from unfair dismissal and reliant upon continued work) with the unattractive prospect of having to suffer a detrimental impact on his remuneration by taking unpaid leave. The court has confirmed that a worker may carry over and make a claim for untaken leave entitlement on the termination of the engagement in these circumstances.”
James Williams, barrister at Henderson Chambers who represented Mr King, says:
“This decision will be of great significance to many workers wrongly categorised by their employers as self-employed. In the short term they should now be able to bring, on termination of their engagement, a claim for all the holiday pay that they should have been paid during the working relationship. In the longer term, the decision should reduce the financial incentive for employers to deny that their staff are entitled to holiday pay – since if the employer gets this wrong, it must compensate the worker accordingly. This means that companies who deliberately categorise their staff as self-employed to deny them basic employment rights should no longer gain such a significant competitive advantage.”
Alan Lewis an employment partner at law firm Irwin Mitchell, says:
“The ECJ made it clear that previous cases involving sickness which imposed limits on how far back holiday could accrue should not be followed. Here the employer was not faced with periods of absence which could have led to difficulties in the organisation of work, but instead was able to benefit from the fact that Mr King did not interrupt his professional activity in its service in order to take paid annual leave. This means that workers like Mr King should be able to recover all untaken holiday although that will be limited to 20 days rather than all additional holiday.
“Following today’s ruling, businesses with workforces of uncertain or marginal employment status could be facing huge financial liabilities for holiday pay. The European Court has made clear its forthright position by stating, ‘an employer that does not allow a worker to exercise his right to annual leave must bear the consequences.’ Gig-economy employers in particular will be affected hugely by the decision.”
Nick Chronias, Partner in the Employment & Pensions Group at law firm DAC Beachcroft, says:
“This decision expands the scope of the right to carry over holiday to situations where individuals are prevented from taking their leave for reasons other than sickness absence. It means that if an individual is found to be a worker and can say he or she would have retrospectively taken more holidays had he or she been paid for them, then the worker would be entitled to carry over the holidays until he or she is paid for them on termination.
“The CJEU has said that there should not be any limit on carry-over, which could mean that individuals may claim holiday pay going back a number of years. This principle might not be limited to individuals found to be a worker; it might apply to those who have had long-term absences or have not taken their leave for reasons other than sickness.
“The case is particularly topical given the recent high-profile worker status cases involving Uber and Deliveroo and others. The CJEU said that it is irrelevant if the employer wrongly concludes that an individual is not entitled to paid holiday because he or she is self-employed. It is up to the employer to get this right and if it doesn’t allow a worker to exercise his rights it must bear the consequences. This adds another layer of complexity for the government to consider on whether to change our laws on employment status in light of the Taylor report.
#2Finally, this case also suggests that the Regulations introduced to limit the backdating of claims for unpaid wages to two years may be incompatible with EU law. There are likely to be cases to explore this. If they went in favour of the employee, this would be bad news for employers facing claims for non-payment of overtime in the first four weeks of holiday pay.”
Helen Watson, Partner and Head of Employment Law at Aaron & Partners says:
“This case has potential implications because of the back pay attributed to this case.
“Thirteen years is a long time and a lot of money for any employer and that is just one worker. The indication was that back pay of up to two years was likely to be the consideration, so this case casts some new doubts over that and potential hefty compensation awards at tribunal if this is the principle that is applied moving forwards for unpaid holiday claims where worker status is accepted.”
Joy Drummond, a Partner at Simpson Millar, says:
“This decision raises many questions under UK law, here are a few that come to mind.
“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 WTRs, the Deduction from Wages (Limitation) Regulations and the EAT 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?”