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No bar on recovery of holiday pay for workers who haven’t taken leave

The European Court of Justice (“ECJ”) has given a very clear and potentially troubling decision in King v The Sash Windows Workshop Limited.

Mr King had no mention of “holiday” in his “self-employed” contract. Whilst he had taken some holiday (a total of 24 weeks over 13 years – significantly below the Working Time Regulations minimum) he had not been paid for it. In some years he took no holiday at all. In 2008 the company offered Mr King an employment contract. However, he chose to remain on a self-employed contract. When his contract ended he claimed for all of the holiday until his dismissal and for it to be paid. He claimed that he had either been unable to take it due to work commitments or had been put off taking it because it wouldn’t be paid.

UK law makes clear that leave may only be taken in the year in respect of which it is due. It can’t be carried over (which Mr King was seeking to do). Additionally, the Employment Appeal Tribunal (“EAT”) has also set out principles in the UK limiting the ability to claim in respect of a “series of deductions” under the Working Time Regulations – limiting recovery of previous years’ holiday pay.

His claim proceeded up to the Court of Appeal – which sought an opinion from the ECJ. The ECJ ignored the “choice” not to become an “employee” in 2008. It also stated that it was irrelevant that the company believed that Mr King was not entitled to paid holiday. It focussed on the fact that the company had benefitted from Mr King not taking any holiday. The ECJ’s decision clearly specifies that:

a. EU law requires that a worker knows that he is going to be paid before he takes holiday; and
b. A worker can carry over untaken leave until the termination of employment.

This would appear to indicate that workers can carry forward untaken leave until termination if their employer has denied them the right to paid holiday (or wrongly denied that they are workers).

This is clearly at odds with both the Bear Scotland decision from the EAT which limited recovery (due to breaks in the series of deductions) and also potentially the Deduction from Wages (Limitation) Regulations 2014 which limit recovery of holiday pay to two years. It remains to be seen how employment tribunals deal with this conflict.

The only potential highlight for employers arising from this decision, is that it applies only to 20 days Working Time Directive holiday (and not the full 28 days under the Working Time Regulations or any higher contractual entitlement).

The key lesson from this case (and to be honest – the ECJ have been relatively consistent on this point for nearly 20 years) is that employers need to ensure that they allow their “workers” (a considerably wider test than “employees”) paid holiday and seek to ensure that they take it. If you need help managing leave or absence please get in touch on 01924 827869.

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