Employment Rights Update – Holiday Pay

Morrish SolicitorsEmployment, Site NewsLeave a Comment

Holiday Pay – Where Are We Now?

A brief summary of some of the key features of the current law about holidays follows:-

  • The Working Time Regulations 1998 confer on full-time workers 5.6 weeks’ annual leave in each leave year.
  • The European position remains less generous – the Working Time Directive allows only 4 weeks’ annual leave.
  • That means that some of the rules about holidays will be different depending on whether we are concerned with the first 20 days holiday (where European rules apply) or the balance of 8 days (for a 5 day a week worker – 1.6 weeks) – where the contract is likely to prevail.
  • A worker should give notice that is twice as long as the period of leave they are requesting to take as leave.
  • An employer can refuse a request by serving a counter-notice.
  • The employer can also give notice requiring that the employee must take leave on certain dates.
  • As a general rule, leave is ‘use it or lose it’ – there is no absolute right to carry over leave to the next holiday year.
  • If a worker is unable or unwilling to take their holiday entitlement (e.g. because they are off long-term sick) carry over may be allowed – see also the King case below.
  • When calculating holiday pay, payments that are ‘intrinsically linked to the performance of contractual duties’ should be included in the calculation.
  • That means that most overtime and e.g. commission payments will be included in the calculation of holiday pay.  There is still a question mark about ‘voluntary overtime’ and its treatment.
  • It is possible to go back over a period of time to claim unpaid holiday pay as a series of unlawful deductions – but the series is subject to an overall cap of 2 years and is broken by any gap longer than 3 months.

The latest caselaw:  King v The Sash Window Workshop Limited & Another

This case was referred by the Court of Appeal to the European Court of Justice for guidance about a peculiar set of circumstances relating to holiday entitlement.

In June the Advocate General published his opinion about the case.  The ECJ does not always follow the AG’s opinion – but often it does.

Mr King worked for many years ostensibly as a self-employed, commission only salesman, receiving no pay for holidays or sickness absences.

After some 13 years (when his contract was terminated by the company) Mr King brought claims to an Employment Tribunal, including claims for holiday pay dating back over a decade.

It was already established law that a worker who is unable to take holidays because they are e.g. on long-term sick is able to carry over untaken leave so that ‘arrears’ of leave can be claimed when they return to work.

The related question here was this: since Mr King was unable to take leave because there was no mechanism for him to take leave (there being no contract or other arrangement under which he might seek leave) was he in an analogous position and thus able to carry over the previous years’ earned but untaken holidays?

The Advocate General said that he was.

In part, the rationale behind the AG’s opinion was this: the social purpose behind the holiday pay regime is to ensure not that workers are simply paid for holidays, but that they have the opportunity to take them.  It is a health and safety issue in this respect.  Any practice that creates a serious risk that the worker will not take leave is therefore problematical.  The lack of a mechanism by which leave can be requested creates such a risk.

It remains to be seen what view the Court itself will take but we can imagine that there might be a flood of new claims (particularly in the gig economy sector) where e.g. Uber drivers who might now be classified as ‘workers’ rather than ‘self-employed’ are able to rely on the Working Time Regulations to seek back pay because they were (practically speaking) prevented from taking holidays during their work historically.

We will watch this space with interest.


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