Employers Must Respect Workers’ EU Right to Four Weeks of Paid Holiday

Posted on November 30, 2017

The EU Court of Justice (ECJ) has warned employers that they must respect workers’ EU right to four weeks of paid holiday. Failure to do so could result in orders to make holiday payments backdated up to 20 years.

This is the effect of the ECJ decision made in King -v- The Sash Windows Workshop Limited. Here, the claimant, Mr Conley King, had claimed an allowance in lieu of the annual leave he had not taken between 1999 and 2012.

What happened in Mr King’s case?

Mr King worked for the respondent, The Sash Windows Workshop Limited (Sash WW), on the basis of a ‘self-employed commission-only contract’, from 1 June 1999 until he retired, on 6 October 2012. Under that contract, Mr King was paid on a commission-only basis. When he took annual leave, it was unpaid, and, sometimes, he did not take his holiday at all.

On termination of his employment in 2012, he claimed an allowance for the holiday taken and not paid as well as those holidays he had not taken.

Sash WW rejected his claim on the basis that Mr King was a self-employed worker. The issue went to the Employment Tribunal (ET).

The law – the Working Time Directive

Article 7 of the Working Time Directive (Directive 2003/88/EC) (the Directive) provides that workers are entitled to at least four weeks annual paid leave. This entitlement may not be replaced by a payment in lieu – unless the employment relationship is terminated. The Directive was implemented in the UK in 1998 (under the Working Time Regulations 1998 (the Regulations)).

The Employment Tribunal decision – Mr King was a “worker”

Concluding that Mr King was a ‘worker’ (and not self-employed) within the meaning of Directive, the ET identified three different types of unpaid holiday:

‘Holiday Pay 1’ - the holiday accrued but untaken at termination in the final leave year (2012/2013);
‘Holiday Pay 2’ - leave actually taken between 1999 and 2012, but unpaid; and
‘Holiday Pay 3’ - the pay in lieu of accrued but untaken leave throughout Mr King’s employment (amounting to 24.15 weeks).

The ET held Mr King was entitled to all three types of holiday pay claimed. Sash WW appealed – and the ET decision was overturned.

Further appeals followed and the EU Attorney General’s opinion was sought before the interpretation of the Directive was eventually referred to the ECJ. By that stage, the only issue was whether Mr King was entitled to his untaken, unpaid leave since 1999 (type 3 Holiday Pay).

The ECJ decision

The issues were complex but in summary, the ECJ held that:

an employer who prevents a worker from taking their paid holiday (by not granting the paid holiday) is effectively preventing the worker from exercising his EU rights;
a worker cannot be stopped from bringing a claim for unpaid holiday because a new holiday year has started (and if the Regulations attempt to say that - then they should be ignored); and
if an employer has refused to grant a worker paid holiday, then the only limit on how far back the worker can claim is the introduction of the Directive – i.e. 1996.

Some basic principles of paid holiday leave

The ECJ was clear that:

the right to paid annual leave, as set out in the Directive itself, must be regarded as a particularly important principle of EU social law;
the Directive treats the right to annual leave and to a payment on that account as being two aspects of a single right;
the very purpose of the right to paid annual leave is to enable the worker to rest and to enjoy a period of relaxation and leisure;
an employer must ensure a worker knows he/she is going to be paid for his leave before taking it; and
if the employer denies the worker’s right to four weeks’ paid leave or refuses to admit that they are workers (as opposed to employees), the employee can accumulate the untaken leave until the end of their employment.

What does this case mean?

The King decision sends a very clear message to employers that they must respect workers’ EU right to four weeks paid holiday. Failure to do so, could mean that workers can claim holiday pay for those years worked going as far back as 1996.

Could this mean an increase in employment cases?

There could now be a flurry of employment law claims for two reasons:

this decision allows workers to backdate their claims all the way to 1996. In some cases, this could amount to a substantial amount; and
the fact that claimants do not have to pay ET fees following the recent decision in Unison* will encourage workers to bring claims. Previously, they might have been put off by the potential cost – especially in those cases where the fees were likely to exceed the value of the claim.

The limitation point – will there be a knock-on effect for other holiday pay claims?

The King case, and the potential for claimants to backdate their claim for nearly 20 years, will no doubt raise questions about the limit applied in cases such as Bear Scotland -v- Fulton*.

In Bear Scotland, there was a claim for holiday pay based on the employee’s basic wage plus non-guaranteed overtime. In that case, the court held that such claims could not be brought if there had been a 3-month break since holiday was taken. In future cases, claimants may well argue the longer limit authorised by King overrules the 3-month limit in Bear Scotland.

Contact

To discuss holiday pay claims or any other employment law issue, contact Susan Mayall on 0161 684 6948 or make an enquiry.

*Further reading

For more on the Bear Scotland case, click here.

For more on the Unison case, click here.

Please note that the information and opinions contained in this article are not intended to be comprehensive, nor to provide legal advice. No responsibility for its accuracy or correctness is assumed by Pearson Solicitors and Financial Advisers Ltd or any of its members or employees. Professional legal advice should be obtained before taking, or refraining from taking, any action as a result of this article.

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