No rest for the workers?
Who should bear the risk when there's no provision within an employment relationship for exercising the right to take holiday – the employer or the worker? That's the question that the Attorney General of the Court of Justice of the European Union recently considered, making a clear decision in favour of the worker.
Under the European Working Time Directive, workers are entitled to take four weeks of paid annual leave and employers must also provide an ‘adequate facility’ (or opportunity) for workers to take this right. Once the worker has been provided with the opportunity to take paid annual leave, then any relevant national restrictions on the right to take annual leave will then kick in. By way of example of such a restriction, the UK requires workers to take annual leave in the year in which it is accrued save for in specific circumstances and restricts claims for unlawful deductions from wages to two years’ back pay.
From 1999 to 2012, C. King was a self-employed salesman who sold installations of windows and doors. He was paid in commission based on his sales and did not receive any salary. His contract did not mention paid annual leave and any holiday that he took, was unpaid. Sash Windows offered to employ King, but he opted to remain self-employed. King’s contract was terminated on his 65th birthday and he brought claims for age discrimination and holiday pay, arguing that he was, in fact a worker.
The employment tribunal agreed that King was a worker rather than being truly self-employed and upheld his claims. It agreed that King should be paid for i) accrued but untaken leave from his final year of work; ii) the period of leave that he actually took during the time he worked for Sash Windows (£17,402); and iii) the leave that he was entitled to take whilst working for Sash Windows, even though he did not in fact take it (£9,336.73).
Sash Windows objected to the third finding; that King should be paid for leave that he did not even try to take and appealed. The Employment Appeal Tribunal agreed with Sash Windows and effectively decided that a worker would first have to take unpaid leave; and only after having done so, could the worker test whether he would be entitled to be paid. King appealed again and the Court of Appeal referred both this question and the question of what leave can be carried forwards and what compensation can be sought, on to Europe, where it was considered by the Advocate General.
He decided that the Employment Appeal Tribunal’s approach effectively put the onus on a worker to take steps to create an adequate opportunity, before they could take paid annual leave. In his view this was the wrong approach. It would be an unlawful pre-condition to impose on workers trying to take paid annual leave; and employers are legally bound to provide adequate facilities to workers to allow them to exercise their rights to take paid holiday.
The Advocate General noted that holiday pay cases which addressed whether the worker actually had the opportunity to exercise the right to paid annual leave were irrelevant when considering this case because the relationship between King and Sash Windows did not even provide for the exercise of the right to take paid annual leave. As a result, unless King’s offer letter was found to provide evidence of Sash Windows offering him adequate facility to take paid annual leave (a question for the Court of Appeal) then King was entitled to receive payment for holiday that he had not taken in respect of the whole period that he worked for Sash Windows.
Finally, the Advocate General also took the opportunity to deliver a lesson in European thinking on the subject of holiday pay, explaining that the right to paid annual leave was a particularly important principle of EU social law and that it was a matter of respect for human dignity.
Nick Elwell-Sutton, partner at Clyde & Co, explained, "Gig-economy employers should take careful note of this decision – if it's followed by the main Court, it could result in employers being required to pay out significant sums in holiday pay, both for the periods of leave that their workers take during their contracts and for any leave that's accrued but untaken on termination."
However, it is worth noting that if the contract with Sash Windows had provided for King to take paid holiday, but he had chosen not to take it, then the outcome would be very different as it is unlikely that he would then be entitled to payment in respect of his holiday for the entirety of his engagement with Sash Windows.
Clare Gilroy-Scott, partner at Goodman Derrick LLP, who represents King, commented, “The Advocate-General has noted the ‘acute social importance’ of the issues in Mr King’s case, given the prevalence in the so-called gig economy of what were once atypical working patterns. Although not binding, the duty of the Advocate-General is to make submissions to the European Court, following the hearing, to provide guidance to the Court in relation to its decision. Prudent employers will want to consider the employment status of their workforce, assess the risk and potential cost of backdated holiday pay claims and ensure that their workers, as well as employees, have a “facility” for the exercise of their right to paid annual leave, without having to resort to costly legal action in order to enforce that right.”
James Williams, barrister at Henderson Chambers who represents King, added, “If the Advocate-General’s opinion is followed by the Court it will have profound consequences for many businesses with workforces of uncertain or marginal employment status. A worker may now be able to wait until the end of his or her employment before challenging any failure by the employer to offer paid leave. Employers could face a large number of such claims, since a worker should no longer need to risk his job to bring it. The Advocate-General was at pains to emphasise the fundamental importance of the right to paid annual leave for workers (a right contained in the EU’s Charter of Fundamental Rights), and that without the possibility of a payment in lieu on termination for untaken leave the worker would lose “all enjoyment” of the right.”
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