The calculation of holiday pay has been the subject of a number of high profile legal challenges recently. Back pay for enhancements to holiday pay has to date been limited to 2 years.
However, in a significant European decision, the Court of Justice of the European Union (CJEU) has ruled that workers who have been wrongly treated as self-employed are able to claim compensation for all accrued untaken holiday, and that there is no limit on the number of years for which holiday may be claimed.
Mr King had worked for Sash Windows for 13 years on a self-employed and commission only basis. After he was dismissed, an Employment Tribunal ruled that Mr King should have been classified as a worker.
Mr King had taken some holiday during his engagement with Sash Windows but this was unpaid. In the referral to the European court, he was successful in arguing that he was entitled to a payment in lieu for the holiday that had accrued since the start of his employment and which he had not taken.
The CJEU held that:
a worker does not need to actually take holiday without pay in order to bring a claim for the payment of that holiday; and
there should not be a limit on the number of years in which holiday can be accumulated and carried over.
What does this mean?
The effect of this decision is that individuals who are wrongly labelled as self-employed who are in fact workers or employees would be able to claim holiday pay going back many years and, like Mr King, potentially claim holiday pay spanning back to the beginning of the employment relationship. Mr King’s 13-year holiday pay claim is valued at around £27,000.
At this stage, this decision is not binding on private sector employers in the UK. The matter will be considered by the Court of Appeal who will make a decision about its application under UK law. If applied, its effect is likely to be far reaching.
What should you do?
Employers should take steps to identify any employment arrangements which could pose a risk in terms of status. There is now a greater incentive for workers who feel they have been wrongly classified as self-employed to now bring claims for unpaid and untaken holiday. There is no limit to the number of years this could cover so the financial implications could significant for employers.
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