A stark warning to businesses for backdated holiday pay claims
The European Union (CJEU) judgment in the case of King v Sash Window Workshop Limited is highly likely to have profound implications for businesses benefiting from the so-called “gig economy”, who engage with self-employed workers. It exposes businesses to significant backdated holiday pay claims.
The facts
Conley King joined the Sash Window workshop in 1999 as a self-employed, commission-only salesperson. Upon departing Sash Window Workshop in 2012, King brought a number of claims against the business on the grounds that, during his 13 years with them, he had suffered a number of unlawful deductions from his earnings, namely that he had not been paid holiday pay.
Mr King’s contract made no mention of leave, and all leave taken by King during his 13 years with the business was unpaid. This was, his employer claimed, due to his self-employed status.
On the contrary, King claimed that he was entitled to holiday pay, and pay for unused holiday that had accumulated over the 13-year period. The tribunal ruled in favour of King, asserting that he was a worker and thus entitled to paid annual leave, but the case failed at the Employment Appeals Tribunal. When King escalated the claim to the Court of Appeal, it was referred to the CJEU.
Currently, under the Working Time Directive, statutory holiday entitlement expires at the end of each leave year, and can therefore not be carried over into the following year. This is true in all cases, unless a worker taking sickness absence is prevented from taking planned annual (paid) leave. Nevertheless, the CJEU ruled in favour of King, arguing that it was irrelevant that King’s employer believed he was not entitled to annual leave because he was self-employed. It decided that workers who are prevented from taking annual leave by their employers should be remunerated for the total period of annual leave accumulated during their employment.
What does this mean?
The decision essentially means that workers are entitled to be paid in respect of all accrued holiday to the date of termination. In this case, King was entitled to be paid in respect of 13 years of holiday accrued during his engagement.
The practical consequences are likely to extend far beyond this case. Businesses using a self-employed workforce are likely to face substantial annual leave bills, should their staff be successful in asserting their status as workers as opposed to independent contractors.
It is advised that businesses who engage with self-employed workers should review the terms of their contracts.
If you should have any queries about this case, its implications, or wish to discuss further please get in contact with our Employment Team at either our London (0203 440 3705) or High Wycombe offices (01494 451355).