The EU opinion on holiday pay last week could have widespread implications, says Beverley Sunderland
In the UK, holiday cannot be carried over from year to year unless the worker is prevented through illness from taking their holiday in one year, in which case they must be able to carry it over. However, this is not indefinite as the Court of Justice of the European Union (CJEU) said in KHS v Schult that if the holiday is not taken within 15 months, it could lawfully be forfeited
The only time a payment in lieu of holiday can be made is on termination, as the idea is to force workers to take their holiday from a health and welfare perspective.
From 8 January 2015, a worker can only claim up to two years’ worth of deductions provided they put in their claim within three months of the last deduction and there has not been a gap of more than three months between holidays (Fulton v Bear Scotland). Before that, there was no limit.
In the Sash Windows case that reached the CJEU last week, Mr King was a commission based salesman and had been categorised by his employer Sash Window Workshops Ltd as self-employed. Although he had been offered the opportunity to become an employee, he had rejected this. He was not paid holiday during the whole of his employment, but he did take some unpaid holiday, although not usually the full entitlement.
He was found by a tribunal to have been a ‘worker’ and therefore entitled to paid holiday. He claimed not only the accrued untaken holiday in the year he left, but accrued holiday for the whole of his employment, including the holiday he had not taken. He said the reason he did not take the holiday is because he could not afford to.
The employment tribunal found in his favour and on appeal, the Employment Appeal Tribunal (EAT) accepted that those prevented from taking holiday could be in the same category as those on long term sick and carry over holiday. However, it said that Mr King could not claim for holiday he had not taken because he had already been paid for this; he had worked and so there was no ‘deduction’ and his only loss was a health and welfare benefit. It said that if it was wrong on this, the tribunal needed to consider if the ‘chain’ was broken in accordance with Bear Scotland.
The Advocate General of the CJEU, however, disagreed, saying that employers must provide adequate facilities for their workers to exercise their right to take holiday and workers should not be compelled to take legal action to establish this right; workers don’t have to ask for the holiday before being entitled to it. If a worker does not take holiday because they will not be paid for it, this is being ‘prevented’ from taking it and the right carries over until they are able to exercise it. Finally, a worker prevented from taking leave can, on termination, claim backdated leave for the whole of his employment.
If the CJEU follows this opinion, the limit on claiming backdated holiday will only apply once an employer has made provision for a worker to take paid holiday, not before.
HR departments should be looking carefully at the way in which workers are contracted and be warning finance directors of the potential liabilities – should the CJEU agree with the AG – if those classed as ‘self-employed’ are found to be workers.
Beverley Sunderland, managing director of Crossland Employment Solicitors