The EAT has held that a worker does not have the right to carry over their entitlement to holiday pay if they have taken leave but it was unpaid. This does not apply if the worker does not take holiday because it is unpaid.
The facts
In 2017, the European Court of Justice held that workers are entitled to be paid on termination for any periods of annual leave that have accrued during employment if they have been discouraged from taking leave because it would have been unpaid. There is no limit on the amount of holiday that could be carried over under these circumstances. This case is referred to below as the “ECJ Decision”.
Mr Smith worked for Pimlico Plumbers as an engineer. He was treated as a self-employed contractor. While he worked for Pimlico Plumbers he had been allowed to take holiday, but had not been paid for it.
Mr Smith left Pimlico Plumbers in 2011. He subsequently claimed that he had been an employee and was therefore entitled to payment for unpaid holiday throughout his employment. The final holiday payment to which Mr Smith claimed he was entitled related to holiday taken in February 2011. His claims were submitted in August 2011 (i.e. outside the three month time limit for bringing claims for unpaid holiday).
In 2018, in a landmark judgment on employment status, the Supreme Court held that Mr Smith was a worker. He was therefore entitled to paid holiday. His claim for backdated holiday pay was sent back to the employment tribunal so that the tribunal could decide whether he was entitled to backdated holiday pay.
The tribunal dismissed his claim for unpaid holiday pay on the basis that it was out of time. The tribunal also held that it did not consider that the ECJ decision entitled Mr Smith to bring a claim in respect of holiday pay for holiday that had, in fact, been taken (albeit unpaid).
Mr Smith appealed to the EAT, which dismissed his appeal.
The EAT agreed with the employment tribunal that the ECJ decision did not apply to holiday that had been taken but was unpaid. The ECJ decision had related only to accrued but untaken holiday leave. The EAT also considered that, in any event, Mr Smith’s claim was out of time as it would have been reasonably practicable for him to have brought his claim for unpaid holiday within the three month time limit. The EAT also noted that, even if his claims for holiday in February 2011 had been brought in time, claims for earlier deductions for the rest of his time working for Pimlico Plumbers would not have been in time. This follows a previous EAT decision (in 2014) which established that, where there is a gap of three months or more between deductions, the deductions cannot be treated as a continuing “series of deductions” in relation to which a worker can bring a claim. The next most recent deductions were more than three months before the deductions in February 2011, so he would have not been able to claim for these in any event.
What does this mean for employers?
This case is most likely to be relevant in relation to claims where individuals treated as being self-employed should actually have been treated as workers or employees.
Following this case, employers will not have any liability for holiday that has been taken and unpaid over previous years. However, we understand that Mr Smith has been given leave to appeal, so this may not be the last word on this.
This judgment will not affect the position where workers have not taken holiday because it would have been unpaid.
This case also confirms that a gap of three months or more between periods of unpaid holiday breaks the chain in a series of deductions, limiting the scope of many claims. However, it is possible that this position may be overturned in a case to be heard by the Supreme Court next month in the case of Chief Constable of Police Service of Northern Ireland v Agnew
