Holiday Pay Decision Could Have Significant Impact on Employers

In the case of King v The Sash Window Workshop Ltd (SWW) the Court of Justice of the European Union (CJEU) has delivered an important decision which is likely to have a significant impact on employers across the UK.

In this case, SWW believed that Mr King was self-employed. As a genuinely self-employed person Mr King would not have been eligible for the minimum statutory holiday entitlement. The employment tribunal however decided that Mr King fell into the category of ‘worker’ which meant that he was entitled to statutory holiday and holiday pay.

The case was appealed and eventually came before the Court of Appeal which made references to the CJEU in order to determine questions of EU law relating to the case.   

The CJEU has now delivered its judgement. It has been decided that a worker who is prevented from taking paid holiday by his employer’s refusal to recognise an entitlement to statutory leave, has a right to claim for any unpaid holiday pay due from 1996 (the date when the Working Time Directive came in to force) to the date the employment terminates.

In reaching this decision the CJEU drew a distinction between a person who is unable to take leave due to sickness and, as in the current case, where a worker is prevented from taking leave because the employer does not accept there is an entitlement.

In the case of the sick employee, the CJEU noted that, where a worker had been absent for several consecutive years, regard had to taken not only for the protection of workers but also the protection of employers where, for example, there may be difficulties in the organisation of work. In the case of sick leave therefore it would be acceptable for national law to limit any carry-over period to up to 15 months. In contrast, however, the CJEU felt that employers that do not allow workers to exercise the right to paid leave (as in the current case), ‘must bear the consequences’.  

This is an important decision. Employer’s that use self-employed contractors may find themselves facing large claims for holiday back pay where it is successfully argued that the contractors are in fact ‘workers’.