Can a Worker Carry Over Holiday That Has Been Taken But Unpaid?
So, can a worker carry over holiday that has been taken but unpaid?
The Court of Appeal in Smith v Pimlico Plumbers said yes.
Mr Smith worked for Pimlico Plumbers Limited, from 25 August 2005 until May 2011. Pimlico maintained that Mr Smith was a self-employed independent contractor who had no entitlement to paid annual leave. Mr Smith took periods of leave from time to time, but these were always unpaid.
On termination, Mr Smith brought an ET claim alleging that he was a worker who was entitled to paid annual leave throughout the engagement, and he sought to recover compensation for unpaid leave.
Mr Smith was held to be a worker by the Supreme Court. Accordingly, he was entitled in principle to 5.6 weeks’ paid annual leave under the Working Time Regulations.
Mr Smith sought repayment of the 4 weeks’ leave required by the Working Time Directive, from the start of his employment, carried over each year until his termination.
Mr Smith relied on a case called King v Sash Windows as authority for the proposition that leave could be carried over in this sort of case.
The Tribunal and EAT decided that he could not rely on King v Sash Windows. They thought King only applied to leave which had not been taken. Mr Smith had taken leave; he simply hadn’t been paid for it.
The Court of Appeal held that the answers given by the CJEU in King v Sash Windows rest on principles with a broader reach, and are to be read as extending to cover workers who have taken leave but have not been paid for it in the circumstances described.
The Court held that King does not require workers to show that they were in fact deterred from taking leave. Rather, not granting paid annual leave is “liable to dissuade the worker from taking annual leave”, and any practice that may deter a worker from taking annual leave is incompatible with Article 7, i.e. there is a right to be paid when the leave is taken as this enables the worker to have the necessary rest and relaxation which paid leave is intended to provide.
A worker faced with uncertainty about whether they will be paid for leave when taking it cannot fully benefit from that leave as a period of relaxation and leisure in accordance with Article 7 of the WTD. Similarly, such uncertainty was liable to dissuade the worker from taking annual leave. No evidence of actual deterrence was required.
The Court also held that the language of Article 7(1), Article 31 of the Charter, and King, establishes that the single composite right which is protected is the right to “paid annual leave.” If a worker takes unpaid leave when the employer disputes the right and refuses to pay for the leave, the worker is not exercising the right. Although domestic legislation can provide for the loss of the right at the end of each leave year, to lose it, the worker must actually have had the opportunity to exercise the right conferred by the WTD. A worker can only lose the right to take leave at the end of the leave year (in a case where the right is disputed and the employer refuses to remunerate it) when the employer can meet the burden of showing it specifically
and transparently gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave and informed the worker that the right would be lost at the end of the leave year. If the employer cannot meet that burden, the right does not lapse but carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of the untaken leave.
The Court of Appeal also gave a strong provisional view that the Northern Irish Court of Appeal case of Chief Constable of the Police Service of Northern Ireland and anor v Agnew and ors should be preferred over the EAT case of Bear Scotland v Fulton, meaning that a gap of more than three months between deductions should not prevent the deductions forming part of a ‘series’ for the purpose of bringing an unauthorised deductions from wages claim. There is nothing to suggest that the three-month time limit was intended to restrict or qualify the meaning of a “series of deductions”.
The Court stated it is a question of fact and degree, based on the evidence, whether deductions are sufficiently similar or related over time to constitute a “series”. The identification of a sufficient factual and temporal link between deductions will answer the question whether there is a “series” without the need to imply or infer a limit on the gaps between particular deductions relied on as making up the series.
This is a fantastic result for workers. It shows employers that they cannot rely on their own refusal to accept worker status and refusal to pay holiday pay to avoid liability for a claim. If workers have either not taken leave at all or have taken leave but have not been paid for it they can carry over those rights each year and request payment on termination, provided they bring a claim within 3 months (less 1 day) of termination. The only defence an employer would have is if it can show that it had for each leave year:
1. Specifically and transparently given the worker the opportunity to take paid annual leave; and
2. Encouraged the worker to take paid annual leave; and
3. Informed the worker that the right would be lost at the end of the leave year.
The Court of Appeal has also provided a steer in relation to the Bear Scotland issue – whether a series of deductions isbroken by a gap of more than 3 months, preferring the Northern Irish case of Agnew, which is currently non-binding in the UK. Agnew has been appealed to the Supreme Court and is currently awaiting hearing. The Supreme Court decision in this matter would be binding in the UK, and if they follow the Court of Appeal’s reasoning, long-term claims for unpaid holiday pay will become considerably easier to pursue.
