Holiday pay implications for 'gig economy' workers

20 June 2017

 

An opinion by an Advocate General (AG) of the European Court of Justice (ECJ) on holiday pay could have implications for 'gig economy' workers.

 

With thanks to Pinsent Masons for the following report:

 

Mr King (K) worked as a salesman for Sash Window Workshop Limited (SWWL), and was paid commission. He received no paid leave on the basis that he was considered to be self-employed. When he was finally let go at age 65, after 13 years service, he made a claim to ET, including a claim for unlawful deductions of wages in relation to unpaid holiday pay for the entirety of his service.

The ET found that he was a worker and as such was entitled to holiday pay. The Court of Appeal referred the case to the ECJ asking for a ruling on several issues, and the AG has now issued his opinion:

 

  • If a worker does not take some or all of his holiday entitlement in the applicable leave year -  because he is prevented from taking leave (e.g. as Mr King was because the leave would not have been paid), the right carries over until he has the opportunity to exercise it;

  • the worker does not first have to take leave to be able to establish he is entitled to be paid for it (in circumstances where he is prevented from taking the leave); and

  • upon termination of the relationship, a worker is entitled to an allowance in lieu of paid leave that has not been taken. A limit of 18 months is not compatible with Article 7 of Directive 2003/88.

 

Pinsent Masons comment:

 

Bear in mind that this is an opinion only, and it is still for the court to determine. What is perhaps most interesting about the opinion, if followed by the court, is its potential impact on the series of worker/employment status cases arising from the 'gig economy'.

If, as Mr King was, an individual is 're-categorised' as a worker and is then able to establish that they were 'prevented from taking leave', the resonance of this case could be that they would be able to claim for all unpaid and untaken holiday over the entire period of their engagement.

However, that doesn't fit well with the UK position, which limits holiday pay claims made after 1 July 2015 for unlawful deductions from wages to the last two years, following a change made by parliament. Where a break in the 'chain of deductions' is established, the limit is the last three months.

The lack of a limit applied to the carry-over period is again apparently in conflict with previous decisions. The case of Neidel has previously established that an 18 month limit to a carry-over period could well be reasonable.