Self Employed Salesman Entitled to Holiday Pay

The advocate general at the European Court of Justice (ECJ) has ruled that a UK worker is entitled to holiday pay and that untaken leave may be carried over until it can be used.

In the case of C King v The Sash Window Workshop, King, a self-employed salesperson who was paid on a commission-only basis, brought an employment tribunal claim against window and door installation organisation The Sash Window Workshop, seeking compensation for leave that was accrued but not taken, as well as for unpaid holiday days that he had taken over his 13-year tenure. There was no right to paid leave in King’s contract with the organisation.

King was dismissed from his role at The Sash Window Workshop in October 2012, effective from his 65th birthday. In December 2012, King brought the case to the Employment Tribunal (ET), which was heard in August 2013.

The ET ruled in favour of the holiday pay claim as well as an age discrimination claim brought by King with regards to his dismissal. The ET found that King was a worker for the purposes of the UK Working Time Regulations.

The Sash Window Workshop appealed the ET’s decision in favour of the holiday pay claim, taking the case to the Employment Appeal Tribunal (EAT). The EAT case, which took place in November 2014, allowed the appeal and remitted this element of King’s claim to be reheard by the ET. Consequently, King appealed to the Court of Appeal In December 2014, with the hearing taking place in February 2016.

The Court of Appeal then referred the case to the ECJ to clarify components of European law relating to the Working Time Regulations 1998. This included seeking clarification on whether the worker in question would have to take unpaid leave and only after doing so would be able to test whether he was entitled to holiday pay, whether untaken paid leave can be carried over, and if paid leave can be carried over indefinitely.

Image: Advocate general Evgeni Tanchev

Advocate general Evgeni Tanchev issued the opinion that it is incompatible with EU law to require a worker to take leave first before being able to establish whether the worker is entitled to be paid.

Furthermore, advocate general Tanchev considered that should the worker not be provided an opportunity to exercise the right of taking annual leave, the worker should then be given payment in lieu of untaken leave. He also stated that if the worker does not take all of the entitled annual leave because the employer does not pay the worker for leave taken, the paid leave will carry over until it can be taken.

If the employment relationship is terminated, advocate general Tanchev also clarified that the worker is therefore entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which an adequate facility that for the exercise of the right to pain annual leave has been established.

The advocate general’s opinion is not binding on the Court of Justice.

Tanchev said: “I appreciate that the answers to the questions referred I am here proposing would require employers rather than workers to take all the necessary steps to ascertain whether they are bound to create an adequate facility for the exercise of the right to paid annual leave, whether those steps be the taking of legal advice, consultation with relevant unions or seeking counsel from Member State bodies that are responsible for the enforcement of labour law.

“If an employer does not take such action, it will risk having to make a payment in lieu of unpaid leave on termination of the employment relationship. However, this would be in keeping with guaranteeing the effet utile of the right to paid annual leave, a fundamental right of substantive normative weight in Member State law, EU law, and international law, and would also be consistent with the practical reality, recognised in the Court’s case-law, of the worker’s position as the weaker party in the relationship.”

John Turnbull, partner at Trowers and Hamlins, said: “The advocate general’s opinion is of particular significance to the gig economy where, on a number of different occasions, the label of self-employed contractor has been found to conceal an individual’s true status as a worker. Employers who find that those they have always regarded as self-employed contractors, actually have worker status [and] will now potentially be faced with a significant financial liability for unpaid holiday pay.

“It will be of some comfort to remember that, under the Deduction from Wages (Limitation) Regulations 2014 there is now a two year backstop on claims for holiday pay so employers’ liability for unpaid holiday pay will be limited. In the meantime it is not a foregone conclusion that the ECJ will agree with the advocate general’s opinion. The issue will not be finally resolved until the ECJ has handed down its decision.”

Image: Sash Windows Workshop