Action on holiday pay claims
1st December, 2017
After extensive litigation in recent years, businesses have started to understand holiday pay obligations but a recent case has important implications for employers who engage people on a self-employed or contractors basis, who may now be liable for thousands in backdated holiday pay claims.
It is well established that an employee or a worker is entitled to four weeks holiday (under EU law) each year. It was also well established, since legislation in 2014, that if holiday pay was not properly paid then the employee or worker could only go back two years to claim historical unpaid sums.
The European Court of Justice this week considered the two-year cap on claims in the case of King v The Sash Window Workshop Ltd. The case involved an individual who was treated by the business as being self-employed and consequently was not given the benefit of holiday pay. The ECJ concluded that the incorrect label had been used, that King was in fact a worker and was entitled to holiday pay. The ECJ focused on the fact that King had never been allowed to take paid leave and concluded that the cap of two years was not lawful and should not apply.
Why it’s important
This case is especially important to any business which is using an individual for service and is treating them as being self-employed and not paying holiday. There has been a lot of litigation involving Uber and other providers within the ‘gig’ economy. The workers within those ‘gig’ businesses are likely to be able to claim back pay for holiday for many years. But the same principle would apply should any business engage ‘self-employed’ consultants. If those consultants work predominantly for one business then they are highly likely to be workers and would have large claims for back pay.
The case also calls into question the two-year cap for all holiday pay claims. Many businesses still do not pay holiday calculated correctly, overtime and commission or other allowances are often excluded from the holiday pay calculation. It is arguable that any claim for underpaid holiday pay is no longer limited to two years and that employees can claim for all historical pay.
If you require any further information, please contact Joe Thornhill.
Please note that this briefing is designed to be informative, not advisory and represents our understanding of English law and practice as at the date indicated. We would always recommend that you should seek specific guidance on any particular legal issue.
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