Employers that have ‘self-employed’ staff who are found to be ‘workers’ could face a huge bill for holiday backpay after a European Court of Justice (ECJ) decision.
The ECJ held that, where a worker is prevented from taking paid holiday, they can carry over any unused paid annual leave. This could have huge ramifications for gig economy employers who are found to have engaged ‘workers’ rather than self-employed contractors.
In the case of King V The Sash Window Workshop Ltd, Mr King worked as a self-employed salesperson on a commission only basis and, as such, did not receive holiday pay. He worked as a salesperson for 13 years before his engagement ended in 2012.
At this time he brought several employment tribunal claims, including contending that he was a worker and not self-employed, and a claim for unlawful deductions from wages – he claimed compensation for the loss of holiday pay for unpaid leave, as well as for pay for the holiday he had accrued but not taken.
An employment tribunal agreed that he was worker and, as such, was entitled to paid annual leave. However, the employer argued that the Working Time Regulations 1998 provide that if paid holiday is not taken in a leave year, then it is lost. However, the ECJ disagreed. It found that if the employer won’t grant the paid holiday, the worker is being prevented from exercising their European rights. As such, they cannot be prevented from bringing a claim just because a new holiday year begins.
In addition, the ECJ held that an employer that fails to grant paid holiday to workers should not be entitled to the normal limits on how much can be carried over.
‘The practical ramifications are that employers whose 'self-employed' contractors turn out to be 'workers' (Uber, Pimlico Plumbers, CitySprint etc) may find themselves facing very substantial holiday pay bills, dating back 20 years,’ said Daniel Barnett, barrister, Outer Temple Chambers. ‘Since this ruling only applies to 4 weeks' EU holiday (rather than all 5.6 weeks of UK holiday), the bill could be 20 years x 4 weeks = 80 weeks' pay per worker.’
He added: ‘There must also be very considerable doubt over whether the EAT's decision in Bear Scotland v Fulton, which held that tribunals cannot award backpay for unpaid holiday leave beyond any three month break in unpaid EU holiday leave, can survive this decision.’