The Working Time Directive (WTD) provides for all EU workers to receive at least 4 weeks paid annual leave a year. The WTD was incorporated in to UK law by the Working Time Regulations 1998 (WTR). The WTR provide for workers to receive 5.6 weeks paid leave.
Following a number of high profile cases both in the UK and European Court of Justice (ECJ), it is now well established that workers who are unable or unwilling to take annual leave because of sickness absence have the right to take that leave at a later stage even if that means carrying it over in to a new leave year. Workers are entitled to receive a payment in lieu on termination in respect of any accrued leave that has been carried over as a result of sick leave. But what happens if someone has not taken all or some of their annual leave because they would not have been paid for it?
Facts of the case
Mr King started work for The Sash Window Company in 1999. He was a commission-only salesman which meant he did not receive any salary, paid holidays or paid sickness absence. In 2008 the Company offered him the opportunity to become an employee. Mr King elected to remain self-employed. He was subsequently dismissed by the Company in 2012 when he turned 65. Mr King issued proceedings for age discrimination and unpaid holiday pay by way of an unlawful deduction from wages claim. He argued that he had not taken his full holiday entitlement in any holiday year as it would have been unpaid.
The Tribunal & Employment Appeal Tribunal (EAT) decisions
The Tribunal upheld Mr King’s age discrimination complaint. They also upheld his claim for unpaid holiday pay in respect of the following:
- Pay in lieu of accrued untaken leave from the current leave year;
- Leave requested and taken in previous years; and
- Pay in lieu of accrued untaken leave from previous years.
The Company appealed the Tribunal’s decision in relation to (3) on the basis they maintained that Mr King had not been prevented from taking his annual leave, unlike those on sick leave, and therefore he had no entitlement to payment for leave accrued but untaken. The EAT upheld the Company’s appeal and Mr King appealed the decision to the Court of Appeal.
European Court of Justice (ECJ) – Advocate General’s opinion
In considering his case the Court of Appeal referred a number of questions to the ECJ. In essence the Court of Appeal wanted to know whether Mr King should be paid in lieu in respect of all accrued but untaken holiday for the duration of his employment or whether he could only claim for unpaid leave he had actually taken.
In accordance with standard ECJ practice, the Advocate General (AG) has considered these issues and delivered his opinion. As far as the AG is concerned, it would be incompatible with EU law to require a worker to take leave first before being able to establish whether he is entitled to be paid for it. In his opinion, employers are obliged to provide adequate facilities to enable workers to exercise their right to paid annual leave. As a result, if a worker does not take all or some of the annual leave they are entitled to, in circumstances where they would have done so had the employer agreed to pay them, they can claim payment in respect of that leave. As for how far back those claims can go, the AG has confirmed that the right to carry over accrued untaken leave continues indefinitely unless and until workers have the ability to take paid leave. In the circumstances, if someone has never been given this opportunity they would be entitled to a payment in lieu to cover the full period of employment.
Sarah Scholfield comments:
Whilst the ECJ does not always follow the opinion of the AG in most cases it does. Should it do so here, the decision could have wide ranging implications for employers, particularly those in the gig economy. Employers in this sector tend to use a lot of casual workers and these individuals may never have taken any annual leave in the mistaken belief they are not entitled to it. As a result, employers could face claims from these individuals for back dated holiday pay going back over several years which may put some businesses in severe financial difficulty. In the circumstances, we await the ECJ’s decision with interest.Back
Sarah is a Solicitor in our Employment Team. Sarah has extensive experience advising employers on a wide range of employment matters including unfair dismissal, discrimination and whistle blowing claims, drafting contracts of employment and dealing with disciplinary/grievance matters. She also regularly advises employees on settlement agreements, disciplinary/grievance matters and unfair dismissal. She is a member of the Employment Lawyers Association. Sarah has been described as “extremely knowledgeable… diligent, sharp” whilst retaining “that all important client focus”.
Sarah Scholfield - Solicitor
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