Holiday Pay and Worker Status

Holiday Pay and Worker Status

The European Court of Justice handed down a judgment on 30th November that might have wide ranging implications for employers and must be understood, if only to assess the risk posed to any business.

The case is called King v Sash Windows (2017) and the full judgment can be read here.

Mr King worked for 20 years believing he was self-employed.  It was made clear to him that he could not have paid holiday. This was because he was self-employed. When he left the employer, he went to tribunal claiming he was not self-employed, but was actually a “Worker”. (Click here for case explaining the significance). The tribunal agreed with him and so he was entitled to paid holiday.

There are two things to remember when talking about accrued and unpaid holiday. One is that the Working Time Regulations say that if three months pass without an unpaid holiday, it puts the failure to pay out of time and so cannot be pursued in tribunal. The second thing is that the case of Bear Scotland last year set out that if there was no gap of three months, then the most a worker could go back in terms of time was two years. This limited the ability to claim to a maximum of 8 weeks unpaid holiday.

This case has undone both of those previous principles. In short therefore, a person who turns out to be a worker, not self-employed, and who has not been able to take paid holiday, will be able to claim 4 weeks per year of service going back to 1996 (the year the original Working Time Directive came into force).

Example of the risk posed.

If a business has say 5 self-employed people who turn out to be workers, and they have an average of 5 years’ service each, and an average of £500 per week earnings (it’s likely to be more than that) then that would be 4 x £500 = £2,000 per year. 5 years at £2,000 = £10,000 per worker, multiplied by 5 = £50,000 that would need to be found.

Likelihood of any business being tested?

Up until now, the tribunal fees regime has prevented people going to tribunal with holiday claims because the amounts at stake did not justify the fees.

Employers face a perfect storm on this as the tribunal fees have gone completely and the amounts that can be claimed have just increased considerably.

Advice?

The best practical step that can be taken at present is to re-examine the arrangements any business has in relation to staff who are thought to be self-employed. Work out whether they are legally self-employed or whether they are just labelled self-employed and are actually workers.

If they are workers, there may be steps you can take to limit liability long term, but it will certainly involve starting to pay holiday, and you will only know if you are at risk if you examine their status properly.

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