Calculating Holiday Pay for Workers

The recent Uber cases have highlighted the difficulties of clarifying whether someone is an ‘employee’, ‘worker’ or ‘self-employed individual’. We have also reported on the difficulties surrounding the calculation of holiday pay and the latest guidance from the courts. The case of King v Sash Windows Workshop Limited and anor deals with both these points and is currently awaiting a decision from the European Court of Justice (“ECJ”).

Mr King worked for Sash Window Workshop Ltd (“SWW”) for some 13 years as a self-employed, commission-only salesman. During that time, he took between 3 – 4 weeks holiday each year but did not take more for financial reasons, as the leave was unpaid. The company terminated Mr King’s contract in October 2012 and he brought a claim for unpaid holiday pay.

The first hurdle Mr King had to overcome was to show that he was a ‘worker’, rather than a self-employed individual. Workers are entitled to 28 days paid leave per annum (pro rata for part timers) whereas self-employed individuals are not.

At first instance, an Employment Tribunal (“ET”) accepted that Mr King was a worker and ordered that he should be paid holiday pay for the days he had taken as leave but had not been paid for. Controversially, it also ordered that Mr King should be paid for the additional leave that he had been entitled to take but had not taken, ie the balance of his 28 days entitlement throughout his engagement. According to the ET, Mr King was entitled to this payment because he had been prevented from taking the additional leave for reasons beyond his control.

The Working Time Regulations 1998 set out an individual’s right to paid annual leave. They state that if holiday is not taken at the end of the holiday year in which it is accrued, then the leave is lost and no payment in lieu can be made other than on termination of the contract.

SWW appealed to the Employment Appeal Tribunal and Mr King subsequently appealed to the Court of Appeal. The Court of Appeal sought clarification from the ECJ on two points, namely, i) does an individual have to take the leave in order to be entitled to be paid for it, and ii) were there any restrictions on carrying over leave. Whenever key questions are referred to the ECJ, they are usually considered by an Advocate General before being referred to the Court for final judgement.

Responding to the Court of Appeal’s questions, Advocate General Tanchey has concluded that companies must provide ‘adequate facility’ for workers to take their entitlement to paid annual leave. If this is provided then it is the worker’s responsibility to use their leave. If they do not then the rules regarding leave being lost can apply.

If, however, an individual is not provided with an adequate facility to exercise their right to paid annual leave, he or she would be entitled to an allowance in lieu of all untaken leave throughout the engagement up to the point when the engagement terminates or adequate facilities are provided.

Although Advocate General Tanchey’s opinion is not binding on the ECJ, it is likely that the ECJ will agree with its conclusions.

So what does this mean for Mr King? Once the ECJ has given judgement, the case will then be considered by the Court of Appeal so it will be some time before he knows the outcome.

The key points to remember in relation to this case are:-

• It is important that the fundamental basis of the working relationship is assessed from the start and kept under review;
• When individuals are entitled to holidays, this should be clearly stated in their contracts and their attention should be drawn to any policies detailing how holidays can be taken. This will avoid any suggestion that ‘adequate facility’ was not provided.

If you have any questions about this case or any other aspect of employment law, please do not hesitate to contact Debbie Sadler on 0118 957 5337 or at d.sadler@hewetts.co.uk.

Published on 22/06/2017