Employers could face huge bills following ECJ ruling

Employers could face huge financial liabilities following a ruling at the European Court of Justice today, which could have wider implications particularly for businesses operating in the ‘gig’ economy.

According to Dr Sybille Steiner, an employment partner at law firm Irwin Mitchell, the case could also encourage those who are currently regarded as self-employed to challenge their employment status.

The case involved a Mr King, a commission-based window salesman, who didn’t receive paid holiday for 13 years. After he was dismissed at the age of 65 by The Sash Window Workshop, King argued at an Employment Tribunal that as a worker he was entitled to receive payment for previously taken unpaid leave.

He also claimed for all holiday pay that had accrued from the start of his employment back in 2001. His employer agreed that he was entitled to receive a payment for accrued holiday pay in the current year but not for previous years, as these were time barred.

King was initially successful at the tribunal and was awarded compensation for all his untaken holiday. However, his employer was successful in having the original decision overturned. Eventually, the case went to the ECJ, who ruled that King should, in principle, be compensated for all untaken leave that had accrued during his work for Sash Windows. 

The Court reiterated that paid holiday is an important health & safety initiative, which is necessary for workers to recover from the demands of working. Workers should not be dissuaded from taking it and must be paid.

Commenting on the ECJ ruling, Steiner said: “The ECJ made it clear that previous cases involving sickness, which imposed limits on how far back holiday pay could accrue, should not be followed. This means that workers like Mr King should be able to recover all pay for untaken holiday, although that will be limited to 20 days rather than all additional holiday.

“Following today’s ruling, businesses with workforces of uncertain or marginal employment status could be facing huge financial liabilities for holiday pay. The ECJ has made clear its forthright position by stating, ‘an employer that does not allow a worker to exercise his right to annual leave must bear the consequences’. Gig-economy employers in particular will be affected hugely by the decision.”

The matter will now be referred back to the Court of Appeal to determine whether the Working Time Regulations can be interpreted in this way.

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