A further blow to the gig economy…

On 29 November 2017, the ECJ has handed down its judgment in King v The Sash Window Workshop Ltd (SWW), supporting the claim of a UK based commission only salesman for unpaid holiday of 13 years. The case now returns to the UK Court of Appeal for a further ruling.

Background

Mr King worked for SWW from 1999 as a salesman working on a commission only basis, with no pay when he was on holiday or when off sick. He was offered an employment contract in 2008 but elected to remain “self employed”. However when he left in 2012, he brought various claims in the employment tribunal. He claimed for holiday pay spanning the entire 13 years of his employment for 1) periods of leave that he had taken in some years but not been paid and 2) pay for accrued leave that he had been unable to take in other years. The employment tribunal (ET) found in his favour on both parts of the holiday claim and SWW appealed to the Employment Appeal Tribunal (EAT) only against the decision in respect of 2) that Mr King was entitled to receive pay for the years in respect of holiday which he had accrued but not taken.

Whilst the EAT made some observations in support of Mr King’s claims, ultimately, they could not find any evidence that Mr King had ever given any notice of an intention to take holiday that was refused and consequently upheld the appeal of SWW and referred the matter back to the ET for reconsideration.

Mr King appealed to the Court of Appeal, which in turn referred a number of questions to the European Court of Justice.

The opinion of the AG was sought and he considered it incompatible with the Working Time Directive that a worker should be required to take leave before the worker is able to establish whether or not he or she is entitled to such paid leave. In the AG’s opinion, if a worker has not taken some or all of their holiday entitlement because of a refusal to pay them when they take such leave, the worker is entitled to claim that they have been prevented from exercising their right to paid leave and the right carries over until the worker has the opportunity to exercise the right. The AG stated that unless an adequate facility to allow a worker to exercise their right to paid annual leave has been provided then the allowance due to the worker on termination of employment should cover the whole period of the employment. The question was asked of the AG as to whether the court should impose a time limit on carrying over such leave where there is no statutory or contractual provision specifying a carry over period. The AG stated that a member state could only impose such a time restriction on carry over if an employer has provided adequate facility for its workers to exercise the right to take paid leave.

In the current case it would be for the UK courts to decide whether the offer of employment to Mr King in 2008, was such adequate facility, in which case his claim would be restricted to the period 1999-2008, but if it did not then he would be entitled to payment in lieu of untaken leave for the entire period that he worked for SWW.

Following the AG’s opinion, the ECJ has now held that if a worker was not paid for his annual leave, it was not compatible with the Working Time Directive to require him to take unpaid leave first to establish his right to paid leave or to prevent him (on termination) from claiming a payment in lieu back to the start of the employment relationship.

As a consequence of the ECJ following the AG’s opinion, this could have significant implications for business engaging gig economy workers, with employers being required to pay large amounts to workers on termination in lieu of both the unpaid holiday they have taken and the holiday they have been discouraged from taking because it would have been unpaid. Workers in effect may now be able to wait until the end of their employment before challenging any failure by their employer to offer paid leave.

For the avoidance of doubt, this case only deals with the situation where workers have not taken annual leave because they have been led to believe it will not be paid. Where workers have already taken leave and not been paid for it, then the usual limitation rules will apply to any deduction from wages claims for the unpaid holiday pay.

The case will now be referred back to the UK courts.

This case highlights the importance of businesses and organisations having a clear understanding of the status of the people working in the business or organisation and of being aware of the rights attached to each individual status. Should you require any further information concerning the issues raised then please contact Sarah Turner on sarah@legatuslaw.com / 0113 302 1330 or 020 787 32279.