European Court of Justice: Decision on Holiday Pay

In King v The Sash Window Workshop Ltd and another (C-214/16), the European Court of Justice (ECJ) considered whether a worker was entitled to be paid on termination for periods of accrued but untaken holiday going back several years where he was deterred from taking holiday because it would have been unpaid.

Mr King worked as a commission-only salesman. He was deemed to be “self-employed” and so was not granted paid holiday. Upon termination of his employment, he brought a claim for holiday pay, arguing that he had not taken holiday because it would have been unpaid. The Employment Tribunal held that he was a worker and so entitled to paid holiday, including holiday accrued but untaken in previous years. His employer appealed and attempted to limit its liability by arguing that under U.K. law, holiday not taken in the year in which it accrues cannot be carried over. 

Upon a referral by the Court of Appeal, the ECJ held that there should be no limit on carrying over accrued holiday where a worker did not take it because he/she was deterred from doing so as it would have been unpaid. In these circumstances, the worker was entitled to pay in respect of all such holiday on termination, and it was irrelevant that the employer wrongly thought that the individual was self-employed. The case will now return to the Court of Appeal to determine whether U.K. law is compatible with this ECJ decision.

This decision will have significant implications for businesses whose self-employed contractors are in fact workers, as we discussed in our update on Uber’s worker status case. It also calls into question the enforceability of U.K. regulations which provide a two-year backstop on holiday pay and the EAT decision in Fulton v Bear, which held that a chain of underpayments will be broken by a three-month gap.