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Holiday Pay – Could you be liable for years of back pay?

The Advocate General at the CJEU (the Court of Justice of the European Union) has held that a workers paid holiday entitlement can carry over if they do not take the holiday because the employer refuses to pay them.

In the case of ‘King -v- The Sash Window Workshop’, the following points were considered;
i.) the right to carry annual leave entitlement over from one leave year to the next.
ii.) the right to claim back pay for untaken leave in previous leave years, particularly when employment has ended.

The CJEU is not bound by the opinion of the Advocate General but will usually be guided by this.

The facts
Mr King, the Claimant a self-employed salesperson was engaged by the Respondent, The Sash Window Workshop, and brought an Employment Tribunal claim against the Respondent, seeking compensation for leave that was accrued but not taken, as well as for unpaid holiday days that he had taken over the period of his employment spanning 13 years.

The Claimant was successful in his claims for holiday pay, and also age discrimination in relation to his dismissal. The Respondent chose to appeal the Employment Tribunal’s decision on the holiday pay point.

The matter was eventually referred to the European Court of Justice to seek clarity in respect of elements of European Law and the Working Time Regulations, where the Advocate General’s opinion was that it is not compatible with European Union law to require a worker to take leave first before being able to establish whether the worker is entitled to be paid.

In addition, the Advocate General considered that should a worker not be provided with an opportunity to take annual leave, the worker should then be given payment in lieu of untaken leave. He also stated that if the worker does not take all of the entitled annual leave because the employer does not pay the worker for leave taken, the paid leave will carry over until it can be taken.

In this case it is worth noting that the 3-month limit issue in holiday pay claims (‘Fulton -v- Bear Scotland’), was not considered here. The Bear Scotland case clarified that:

Anybody making a claim must have had an underpayment for holiday pay that has taken place within three months of lodging an employment tribunal claim.

If a claim involves a series of underpayments, any claims for the earlier underpayments will fail if there has been a break of more than three months between those underpayments.

What does this mean for businesses?
Businesses need to be mindful that workers are entitled to holiday pay and if your workers are not taking their holiday, they could be entitled to back pay. This case has however, been decided based on the fact that the worker did not take holidays as the employer refused to pay them. Further, this particular case does not consider the three-month limit issue in holiday pay claims, which is usually a requirement for such a claim to be progressed, and therefore, it is possible that there will be further case law updates in respect of this point, which we shall of course keep you updated on.

This is an interesting and evolving area of law and we would suggest you contact one of our Employment Lawyers to discuss further should this be a concern for your business on 0161 478 3800 or at hello@peachlaw.co.uk

This document is for informational purposes only and does not constitute legal advice. It is recommended that specific professional advice is sought before acting on any of the information given.

Holiday Pay – Could you be liable for years of back pay?

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