Holiday pay - door opened for increased claims for backpay

Businesses could face substantial holiday pay bills from any workers whose status has been misclassified as self-employed following the European Court of Justice's ruling in King v Sash Windows. This applies to the unpaid holiday workers have taken and to the holiday they were discouraged from taking because it would have been unpaid, whether or not they requested the holiday.

14 Dec 2017
"Child holding adult hand.

Even if such 'employers' start offering paid holiday going forward, liability for the past untaken holiday may remain until termination of the relationship. The untaken holiday carries over into the next holiday year and continues to accumulate – and the limit of an 18 month period of carry over which has been applied in long-term sickness cases is not considered appropriate in the case of these misclassified workers.

The case will now return to the Court of Appeal which will have to decide whether the Working Time Regulations 1998 can be interpreted consistently with the ECJ's ruling.

The case also casts doubt on whether a claim for backdated holiday pay, where a worker has been prevented from exercising EU rights, should be limited to the two year period prior to the date on which the claim is presented (which was introduced by The Deduction from Wages (Limitation) Regulations 2014). If not, claims for unpaid holiday could date back to 1996 when the original Working Time Directive came into effect.

Yet further doubts are raised as to whether a series of deductions is broken by a gap of three months or more, which had previously been decided in the case of Bear Scotland v Fulton.

Holiday pay claims seem set to continue to rumble on through the courts with a lack of clarity for employers. What is certain is that, with Tribunal fees gone, the risk of claims has increased and the potential increased value of these possible holiday pay claims will need to be reassessed.


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