The implications of King v The Sash Window Workshop for backpay claims
A recent ECJ case has set out that employers can be ordered to provide paid holidays to even apparently self-employed contractors. The ECJ went on to provide that backpay holiday claims could stretch back to the worker’s commencement.
Mr King worked for The Sash Window Workshop Ltd between 1999 and 2012. The arrangement between them was that he was self-employed on a commission-only basis. Mr King did take some periods of leave, which he was not paid for.
Following his retirement in 2012, Mr King made a claim to the Employment Tribunal arguing that he had been a ‘worker’ rather than just a self-employed contractor. He claimed payment both for the times when he had taken leave (and had not been paid) and for leave which had been accrued but not taken. The Tribunal ruled that Mr King had indeed been a ‘worker’, and that he was therefore entitled to be paid for both the unpaid and the untaken leave.
The Sash Window Workshop accepted that Mr King had been a ‘worker’ and that he was entitled to be paid for the leave he had taken, and the leave accrued but not taken in his final year of employment. However, they appealed the Tribunal’s judgment that Mr King was entitled to be paid for the leave he had accrued but not taken in the years prior to his final one.
The Sash Window Workshop argued that that any accrued (but untaken) leave from the years before Mr King’s last year in employment had effectively expired at the end of each year, on the basis that the UK Working Time Regulations say that leave ‘may only be taken in the year of respect of which it is due.’ Mr King pointed to EU case law which suggested an incompatibility between UK law and EU law on this point (as EU law has no explicit limit on compensation for leave).
The Sash Window Workshop also argued that any claims in respect of the years preceding the final one were time-barred from being heard, as they fell beyond the Tribunal’s usual limit, where a maximum of three months can pass between the matter in dispute and a claim being commenced. Mr King’s position (relying on the same case law as above) was that the relevant date for starting the three month limitation clock was the point at which he retired, not the end of each annual leave period.
The Court of Appeal noted that the wording of the UK law suggests that a claim that someone was eligible for paid annual leave could only be brought once they had taken some unpaid leave, which appeared incompatible with EU law. As a result, the case was referred to the ECJ for its view on these points.
The ECJ highlighted that workers’ rights to paid annual leave are a ‘particularly important principle of EU social law’, and that Member States should not make this right ‘subject to any preconditions whatsoever’. As the UK Working Time Regulations would compel a worker to take unpaid leave before making a claim that the leave should have been paid, this was incompatible with EU law.
In terms of whether there should be a ‘carry-over’ period for accrued but untaken leave, the ECJ drew a distinction between workers who had been unable to take leave because of sickness (where case law has established around a 15-month carry-over period) and workers who do not take accrued leave and are providing an economic benefit to their employer (as Mr King had been doing by continuing to work). The ECJ made it clear that an employer who had benefited in such a fashion should bear the consequences of not permitting a worker to take their accrued leave, and ruled that the UK restrictions on allowing such leave to be rolled over were therefore also incompatible with EU law.
This case is particularly noteworthy in the context of recent high-profile cases (separately involving Uber and Deliveroo) which have focused on the implications of the legal distinction between someone being self-employed or a ‘worker.’ Although Mr King’s employment status was not an issue contested beyond the initial Employment Tribunal, the ECJ emphasised that even though The Sash Window Workshop had considered Mr King to be self-employed (and Mr King had not requested paid annual leave), the onus was on the employer ‘to seek all information regarding [their] obligations in this regard.’ Employers should review their arrangements with any self-employed contractors to check if they are actually ‘workers’ and entitled to paid annual leave.
Existing limitations on holiday pay claims are now also questionable; this case could have undermined the two year back pay period as well as claims not made within three months of the unpaid leave. It remains to be seen whether the government intends to update the relevant laws in response to the judgment, and employers should watch out for further developments.