'Gig economy' workers could benefit from CJEU decision on holiday pay, expert warns

The Court of Justice of the EU (CJEU), in its conclusions on a UK holiday pay dispute, ruled that a worker in dispute with an employer over entitlement to leave is not required to take leave before being entitled to payment for it. The court also found that no time limits should apply restricting a worker's right to accumulated leave entitlement where the employer refused to allow paid leave to which that worker was entitled.

"This will impact heavily in the 'gig economy'," said Stuart Neilson, an employment law expert at Pinsent Masons, the law firm behind Out-Law.com. "If an individual is 're-categorised' as a worker and is then able to establish that they were 'prevented from taking leave', they would be able to claim for all unpaid and untaken holiday over the entire period of their engagement."

"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. This may require amendment of these regulations for cases such as this one, where the employer prevented leave being taken. It may be possible for employers to take steps to seek to ensure that individuals within their business are not categorised as workers – however, as can be seen from the Uber case, great care must be taken to match what happens in practice with what is set out in the terms of engagement," he said.

The judgment will not impact on cases involving employees who have taken holidays which they allege that they have been underpaid for, Neilson said.

The UK brought regulations into force placing a two-year limit on claims for unlawful deductions from wages following a series of judgments in relation to holiday pay entitlement. In 2014, the UK's employment appeal tribunal (EAT) ruled that regular payments for non-guaranteed compulsory overtime and travel time should be reflected in holiday pay calculations. However, it required the underpayment claim to be brought within three months of the last in a 'series of deductions', and also required that there not be a gap of more than three months between any of the deductions in the series.

The present case was brought by Conley King, a former salesman for The Sash Window Workshop Ltd (SWWL). King worked for SWWL for 13 years, but was paid on a commission-only basis and considered to be self-employed, therefore not entitled to paid leave. He was dismissed by SWWL when he turned 65, and brought employment tribunal proceedings against the company for age discrimination and unlawful deductions from wages in relation to holiday pay for leave accrued but not taken.

The employment tribunal found that King was 'employed' as defined by the Equality Act, and that his dismissal had been an act of unlawful age discrimination. It also found that he was a 'worker' as defined by the Employment Rights Act, which meant that he was entitled to paid holiday leave. The case ultimately reached the Court of Appeal in England, which sought a ruling from the CJEU on several questions stemming from the application of the EU's Working Time Directive.

The CJEU found that a worker, in dispute with an employer over entitlement to paid leave, was not required to take that leave first before establishing whether he had the right to be paid for it. The right to paid leave was "a particularly important principle of EU social law", which could only be limited in the circumstances expressly set out in the Working Time Directive, it said.

Where a worker was prevented from exercising his right to paid annual leave "for reasons beyond his control", that worker must be fully compensated, with no limits placed on accumulation of entitlement, the court said.

"Unlike in a situation of accumulation of entitlement to paid annual leave by a worker who was unfit for work due to sickness, an employer that does not allow a worker to exercise his right to paid annual leave must bear the consequences," the court said.

"On the contrary, the employer was able to benefit, until Mr King retired, from the fact that he did not interrupt his professional activity in its service in order to take paid annual leave," it said.

The court added that it was "irrelevant" whether the company genuinely believed that King was not entitled to paid leave. It was a matter for the employer "to seek all information regarding his obligations in that regard", it said.