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Does a Worker’s Paid Holiday Entitlement Carry Over to Subsequent Years if They Do Not Take Holiday because They Won’t Be Paid for it? It Would Appear So!

In the case of King v The Sash Window Workshop Ltd and another, the Advocate General of the European Court of Justice (‘‘ECJ’’) has given his opinion on whether a worker should be entitled to be paid at the end of their contract for any periods of accrued annual leave where that worker had been discouraged from taking such leave because he/she would not have been paid.   

Legislative Background

Article 7(1) of the Working Time Directive (‘‘Directive’’) states that member states must ensure that every worker is entitled to at least four weeks of paid annual leave. The Directive was implemented in the UK by the Working Time Regulations 1998 (‘‘WTR’’). The WTR provides for a more generous holiday entitlement of 5.6 weeks paid leave and implements other relevant provisions linked to the Directive.

The remedy provisions in regulation 30 of the WTR distinguish between claims where a worker has been denied the right to take annual leave and claims where the worker has not been paid for the annual leave they have already taken. The effect of this separation is that for a worker in the UK to establish their right to paid annual leave, it seemed that they must first take that leave and then bring a claim for unpaid wages for the leave that is taken – along with the litigation risk and cost that incurs. However, the case of King involves a situation where a worker has not taken their leave but still brought a claim for unpaid wages. 

King v The Sash Window Workshop Ltd and another

Mr King worked for The Sash Window Workshop Ltd (‘‘SWW’’) as a commission-only salesman for 13 years. He received no salary (only commission) and was never paid annual leave. SWW terminated Mr King’s contract when he reached the age of 65. Mr King subsequently brought claims for age discrimination and unpaid holiday pay. The decision of the tribunal with regards to the unpaid holiday pay was challenged (the claim was successful at first instance and then went up to the Court of Appeal through various appeals).

The Court of Appeal felt compelled to make a referral to the ECJ through a serious of questions which asked for clarity on whether the WTR were compatible with Article 7 of the Directive. Given the importance of this claim the Advocate General of the ECJ gave his opinion on the questions posed.

Opinion of the Advocate General

In the Advocate General's opinion, employers must provide adequate facilities to allow workers to exercise their right to take paid annual leave and a worker’s right to take annual leave must carry over until the worker has the opportunity to exercise that right. The Advocate General also suggested that the right to paid annual leave must carry over indefinitely unless an adequate facility for the exercise of the right has been provided by the employer – this means that the holiday pay sum due to the worker on termination should therefore cover the entirety of the worker’s engagement or employment where the worker has not had adequate means of exercising that right.

What Next?

Whilst the Advocate General’s opinion is not binding, convention suggests that his opinion is likely to be followed by the ECJ. Businesses will therefore need to watch this space to see whether the ECJ adopts the Advocate General’s opinion and how this impacts on the way the WTR are interpreted in the UK.

King could have significant ramifications for UK employers and businesses operating in the gig economy in particular. If these businesses are found to have discouraged their workers from taking holiday and exercising that right, then additional holiday payments could be due on termination of the contractual relationship. This is of particular concern given the recent flurry of employment status cases we have seen and individuals seeking to assert that they have “worker” rights.  

This bulletin is for general guidance purposes only and should not be used for any other purpose.

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