Holiday Pay

9th February 2022

In Smith v Pimlico Plumbers Limited, the Court of Appeal ruled that Smith, a worker who was previously wrongly classified as self-employed by Pimlico Plumbers, was entitled to holiday pay for the whole time he was engaged by the company. It is an important judgment for organisations which engage self-employed contractors on a long-term basis.

Background

In Court proceedings which made the headlines back in 2018, the Supreme Court found that Smith was a worker, and not self-employed as Pimlico Plumbers had argued. As a result, Smith’s case was remitted back to the Employment Tribunal to deal with his holiday pay claim now he had established his “worker” status.

The Employment and Employment Appeal Tribunals

The Employment Tribunal referred to a case called King v The Sash Window Company where the ECJ ruled that where a worker is not granted holiday they could carry it over indefinitely and, as a result, be paid in lieu for all untaken holiday up to the date when their contract was terminated.

Both Courts made the distinction that King applied to circumstances where the worker had not taken any holiday entitlement. In Smith’s case he had taken holiday, however he hadn’t been paid for it.

Smith appealed to the Court of Appeal.

Court of Appeal

The Court overturned the previous EAT decision which meant Smith was entitled to all his Working Time Directive (“WTD”) unpaid leave (4 weeks each year) for the entire period whilst he worked for Pimlico Plumbers. In his case it was for a period of some 6 years.

The Court found that the decision in King included unpaid leave taken as well.
The decision represents a potentially significant sum of money for Smith.

Comments

There are a number of points that arise from this case:

 

      1. As stated above, it is likely to be of most relevance to companies who engage self-employed consultants/contractors where the question of holidays would not ordinarily be addressed.
      2. By reference to King, consultants/contractors have always been able to carry over any leave not taken out of their 4-week WTD entitlement and then claim for all the accrued leave on termination. This decision, however, extends the scope to include leave actually taken but not paid.
      3. The government introduced the Deduction from Wages (Limitation) Regulations 2014 to limit backdated claims to a longstop period of 2 years. This decision drives a coach and horses through this limitation in circumstances which are similar to this and the King decision.
      4. The Court made numerous references to companies providing workers/employees the opportunity to take leave. Under regulation 13(1) Working Time Directive, the 4 week leave period may only be taken in the leave year in respect of which it is due. Often well drafted contracts will spell out whether or not leave can be carried over into the next holiday year (the “use it or lose it” principle). An exception to this is where an employee/worker can demonstrate that they were not given an opportunity to take leave. So, as well as making sure that any contracts are clear about using up leave, companies should take proactive steps to encourage employees/workers to use all their annual entitlement especially if, in individual cases, leave is building up towards the end of the leave year.
      5. Don’t forget that workers/employees who are on long-term sick, and cannot take their leave, can carry over up to 20 days WTD leave but limited to 18 months currently.

KEY CONTACT

Chris Filor


T 07891055856

F +44 (0)1872 278669

E chris.filor@murrellassociates.co.uk

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