Can a worker carry forward holiday if he does not take it because his employer refuses to pay him?
In King v The Sash Window Workshop Ltd and another (C-214/16), the European Court of Justice was asked to decide if a worker can carry forward paid holiday entitlement from one year to the next if he does not take holiday because his employer refuses to pay him for it. The Advocate-General has given his opinion in the case.
Mr King worked for The Sash Window Workshop Ltd (SWW) as a self-employed commission only salesman from 1 June 1999. There was no right to paid leave in his contract. In 2008 he was offered a contract of employment, which included the right to paid annual leave, but he elected to remain self-employed. He took some holiday but was not paid for it. SWW dismissed him with effect from his 65th birthday on 6 October 2012 and Mr King brought various claims, including for holiday pay.
Employment tribunal decision
The employment tribunal (ET) accepted that Mr King was a worker for the purposes of the Working Time Regulations 1998, meaning that he was entitled to paid holidays, so his claim for holiday pay was successful. The ET awarded him holiday pay under three heads relating to:
- Paid leave accrued but untaken during his final leave year.
- Unpaid holiday which he had taken during his previous 13 years.
- Leave to which he was entitled during the previous 13 years but did not take.
The ET awarded Mr King a total of £27,257.96 in holiday pay. SWW appealed.
Employment Appeal Tribunal decision
The Employment Appeal Tribunal allowed the appeal, holding that the ET had failed to make findings of fact to support its conclusion that Mr King was prevented from taking his annual leave for reasons beyond his control. Mr King appealed.
Court of Appeal decision
The Court of Appeal referred a number of questions to the European Court of Justice (ECJ):
- If there is a dispute between a worker and employer as to whether the worker is entitled to annual paid leave, is it compatible with EU law and the principle of effective remedy if the worker has to take leave first before being able to establish whether he is entitled to be paid?
- If the worker does not take all or some of the annual leave to which he is entitled in circumstances where he would have done but for the fact the employer refuses to pay him for any period of leave he takes, can the worker claim he is prevented from exercising his right to paid leave so that the right carries over until he has the opportunity to exercise it?
- If the right carries over, does it do so indefinitely or is there a limited period for exercising it?
- If there is no statutory or contractual provision specifying a carry-over period, is the court obliged to impose a limit?
- If so, is a period of 18 months following the end of the holiday year in which the leave accrues compatible with the right to paid annual leave?
European Court of Justice
The Advocate General gave these proposed answers to the questions referred:
- No - employers must provide 'adequate facilities' for the exercise of the right to paid annual leave. Once they have done so, workers are responsible for taking it up.
- Yes - where a worker does not use his entitlement to annual leave because he would not be paid by his employer, he can claim he was prevented from exercising his right to paid leave.
- On termination of employment, a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave. If an adequate facility was never provided, an allowance is due to cover the full period of employment until termination of the employment relationship.
- (This question was not answered specifically by the Advocate General.)
- No - a limit to the carry over period of 18 months following the end of the holiday year in which the leave accrued is not compatible with the right to paid annual leave.
The Advocate General also stated that Member States are entitled to impose reference and carry-over periods limiting the right to paid annual leave, as long as they are compatible with EU law, if a facility for the exercise of leave was made available by the employer. Where no such facility was made available, the Advocate General considered that any reference and carry-over periods that would otherwise apply should fall away.
The Advocate General's opinion is not binding but is usually followed by the ECJ. Once the ECJ has given its judgment, the case will return to the Court of Appeal for it to apply the decision. If the ECJ follows this opinion, the Court will have to decide whether 'adequate facilities' for the exercise of the right to paid annual leave were provided by SWW when they offered Mr King an employment contract that included the right to paid holiday.
This case is particularly relevant in view of the rise of the gig economy. It will impact on those who have been categorised as self-employed but are later found to be workers or employees, who will be entitled to holiday pay for the duration of their engagement/employment (assuming the ECJ follows the Advocate General's opinion). However, because it is a decision on EU law, it will only apply to the four weeks' paid leave provided under the Working Time Directive and not the additional eight days provided by the Working Time Regulations.
UK law states that a gap of over three months between deductions will break the chain of causation, and claims issued on or after 8 January 2015 are prevented from going back more than two years from the date of issue. If this opinion is followed by the ECJ, UK law may need to be changed.