Written by Nick Elwell-Sutton and Charlotte Stern
Who should bear the risk when there's no provision within an employment relationship for exercising the right to take holiday – the employer or the worker? That's the question that the Advocate General of the Court of Justice of the European Union recently considered, making a clear decision in favour of the worker.
Under the European Working Time Directive, workers are entitled to take 4 weeks of paid annual leave and employers must also provide an ‘adequate facility’ (or opportunity) for workers to take this right. Once the worker has been provided with the opportunity to take paid annual leave, then any relevant national restrictions on the right to take annual leave will then kick in. By way of example of such a restriction, the UK requires workers to take annual leave in the year in which it is accrued save for in specific circumstances and restricts claims for unlawful deductions from wages to two years’ back pay.
What happened and what was the result?
From 1999 to 2012, Mr King was a self-employed salesman who sold installations of windows and doors. He was paid commission based on his sales and did not receive any salary. His contract did not mention paid annual leave and any holiday that he took, was unpaid. Sash Windows offered to employ Mr King, but he opted to remain self-employed. Mr King’s contract was terminated on his 65th birthday and he brought claims for age discrimination and holiday pay, arguing that he was, in fact a worker.
The employment tribunal agreed that Mr King was a worker rather than being truly self-employed and upheld his claims. It agreed that Mr King should be paid for i) accrued but untaken leave from his final year of work; ii) the period of leave that he actually took during the time he worked for Sash Windows (£17,402); and iii) the leave that he was entitled to take whilst working for Sash Windows, even though he did not in fact take it (£9,336.73).
Sash Windows objected to the third finding; that Mr King should be paid for leave that he did not even try to take and appealed. The Employment Appeal Tribunal agreed with Sash Windows and effectively decided that a worker would first have to take unpaid leave; and only after having done so, could the worker test whether he would be entitled to be paid. Mr King appealed again and the Court of Appeal referred both this question and the question of what leave can be carried forward and what compensation can be sought, on to Europe, where it was considered by the Advocate General (whose decision is not binding but gives a good indication of the likely outcome of the case when it’s heard by the full European court).
The Advocate General decided that the Employment Appeal Tribunal’s approach effectively put the onus on a worker to take steps to create an adequate opportunity, before they could take paid annual leave. In his view was this was the wrong approach. It would be an unlawful pre-condition to impose on workers trying to take paid annual leave; and under the Directive employers are legally bound to provide adequate facilities to workers to allow them to exercise their rights to take paid holiday.
The Advocate General noted that holiday pay cases which addressed whether the worker actually had the opportunity to exercise the right to paid annual leave were irrelevant when considering this case because the relationship between Mr King and Sash Windows did not even provide for the exercise of the right to take paid annual leave. As a result, unless Mr King’s offer letter was found to provide evidence of Sash Windows offering him adequate facility to take paid annual leave (a question for the Court of Appeal) then Mr King was entitled to receive payment for holiday that he had not taken in respect of the whole period that he worked for Sash Windows.
Finally, the Advocate General also took the opportunity to deliver a lesson in European thinking on the subject of holiday pay, explaining that the right to paid annual leave was a particularly important principle of EU social law and that it was a matter of respect for human dignity.
Nick Elwell-Sutton, Partner at Clyde & Co LLP, explains "Gig-economy employers should take careful note of this decision – if it's followed by the main Court, it could result in employers being required to pay out significant sums in holiday pay, both for the periods of leave that their workers take during their contracts and for any leave that's accrued but untaken on termination."
However, it is worth noting that if the contract with Sash Windows had provided for Mr King to take paid holiday, but he had chosen not to take it, then the outcome would be very different as it is unlikely that he would then be entitled to payment in respect of his holiday for the entirety of his engagement with Sash Windows.