Smith v Pimlico Plumbers: Holiday pay - indefinite carry over for unpaid leave

Smith has again successfully challenged his ex-employer, this time in relation to unpaid holiday pay for the entirety of his employment with them.

FACTS 

The claimant was employed by the respondent from 2005 to 2011. Initially agreeing to be an employee, the respondent later treated him as a self-employed independent contractor. His status as a worker had already been established by the Supreme Court in an earlier decision, and this case was as a result of the respondents failure to pay for holiday pay for the duration of the employment. 

As a self-employed contractor, paid leave was not given. The claimant did, however, from time to time, take unpaid leave from his work. Therefore, the question for the employment tribunal (ET), and ultimately the Court of Appeal (CoA) was whether or not the respondent was liable to pay for leave that had been taken, but not paid, and if so, how far back he would be able to claim? 

EMPLOYMENT TRIBUNAL (ET) AND EMPLOYMENT APPEALS TRIBUNAL (EAT)

The ET rejected the claimants holiday pay claim on jurisdictional grounds, as the claim was out of time, as a claim should have been brought within three months of the last time he had taken unpaid leave, rather than within three months of the end of employment. The decision in King was rejected by the ET in that it permitted a claim in respect of all annual leave accrued throughout the employment to be made on termination. 

The subsequent appeal was dismissed, finding the ET was correct in its findings, and that King was not concerned with leave that was taken, but not paid. Instead, it concerned the right to carry over, until termination, annual leave that is not taken because of the employer’s failure to pay for it. 

COURT OF APPEAL (COA)

It was held by the CoA that he could recover compensation for all of the leave, throughout his employment. There was, therefore, no need to distinguish between that leave which was taken, but not paid for, and not taken at all. 

It was found that the principles in King allowed for the indefinite carry over and accumulation of untaken leave forming the four weeks ‘Euro’ leave could also be applied to leave that was taken, but unpaid. Therefore, on termination of employment, four weeks of annual leave for every year of his employment was payable to him. 

Note for employers 

In contrast to the position for workers who do not take annual leave due to sickness, which has a time limit for how long it might be carried over for, workers who are denied the ability to take paid leave are able to carry over the full four weeks of ‘Euro’ leave without restriction. 

This is of huge significance to those working in the gig economy, as it is now clear that even if they do take periods of unpaid leave, this would not count as annual leave, and therefore a three-month time limit from when that leave was taken will not be applied. 

The financial implications of this judgement therefore have the potential to be significant for employers who have denied worker status, especially if that has occurred over a number of years, even if the employer genuinely believed that to be the case, and on that basis refused to pay for leave. 

This is likely to remain the position even with Brexit, as it seems likely that the Working Time Regulations will continue to be interpreted in this way, and as a CoA decision, this is binding authority.

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