The death of holiday pay has been greatly exaggerated, but has the King slain Bear Scotland?
Caspar Glyn QC considers the decision of C‑214/16 King v The Sash Windows Workshop Limited which was handed down today.
Summary
The Court of Justice of the European Union has been saying, in its judgments over the past 11 years again and again and, yes, again that the right to paid holiday is a central European right that can’t be interpreted restrictively. Its far-reaching decision in King v The Sash Windows Workshop Limited repeats that mantra. I predict that it will be the decision that turns the claims for worker status from a trickle into a flood – it may be a tide that overwhelms some employers as even an EAT policy decision like Bear Scotland can’t stem this particular decision.
Analysis
Mr King’s contract was silent on the question of leave. He was not paid for it. Mr King had not taken some 24.15 weeks of holiday between 1999 and 2012 – he took other holidays without pay. In one year he took no leave. In 2008, Sash Windows offered Mr King an employment contract. He elected, however, to remain self-employed. On his dismissal he claimed to be able to carry over all the untaken leave until his termination and require it to be paid. He had either been too busy to take it or not taken it because it was not paid. Importantly, regulation 13(9) of the Working Time Regulations 1998 provides that leave may only be taken in the year in respect of which it is due. It can’t be carried over.
Mr King succeeded at the ET but failed at the EAT. The Court of Appeal then referred the matter to the European Court of Justice. Advocate General Tanchev’s opinion supported his claim to carry over such leave.
The Court ignored the thorny issue of the effect of the contract offer on the claim. The Court was interested in principle, and goodness does it set out clear principles. It noted that the employer had benefitted from Mr King not taking his leave, that it was irrelevant that the employer considered wrongly that Mr King was not entitled to annual leave and that an employer who does not allow a worker to take annual leave must bear the consequences. The tone of those observations signalled, clearly, the way in which the Court was leaning. The Court of Justice, in a short and pithy judgment holds that:
EU law requires that a worker knows that he is going to be paid before he takes leave; and
A worker can carry over and accumulate such untaken leave until the end of the employment relationship.
So, on the face of it, workers can claim leave forever and a day if their employer has denied them that right or not admitted that they are workers. People have pointed to Uber where 40,000 drivers may be able to claim if they have worker status. The stakes in that litigation have just got considerably higher as they have for thousands of businesses and tens of thousands of workers.
This decision only applies to the 20 days of “euro-leave” and not to the additional 8 days under Regulation 13A of the Working Time Regulations. However, lawyers, employers and workers should not think that the comparatively restrictive interpretation of “worker” as set out in our domestic law applies to holiday pay. For working time cases the long held EU inclusive definition applies as can be seen from Fenoll v Centre d’aide par le travail “La Jouvene”. That is, the concept of a “worker” has an autonomous meaning specific to EU law and includes:
…any person who pursues real, genuine activities, to the exclusion of activities on such a small scale as to be regarded as purely marginal and ancillary, must be regarded as a "worker".
This test should apply to all working time cases which stem from the Working Time Directive.
When Lord Reed referred to the Rule of Law that workers should be able to enforce their rights, there can be no better example than working time holiday pay cases. They died under the fees regime. They are back and the Court of Justice has emphatically restated the importance of that right and how employers cannot trade on taking advantage of workers and hoping to avoid their obligations.
Clearly, the decision shines a bright light on whether The Deduction from Wages (Limitation) Regulations 2014 breaches the twin EU principles of equivalence and effectiveness. It is surprising that the Regulations have not been challenged before. Perhaps they will now. Further Bear Scotland and its series of deductions decision that stopped an unlawful deductions claim wherever there was a longer than 3 month gap is open to challenge – although the mechanism under King will be directly under Reg 30 of the Working Time Regulations so it may be more the destination being reached by a different route. Neither the Regulations, nor that decision can withstand the decision in King for cases involving holiday which is not taken because it was not paid. However, King may be the crowbar for lawyers to argue that, in the case of underpaid holiday rather than non-paid, the same principle applies and both the Regulations and Bear Scotland breach equivalence and effectiveness. I certainly won’t mourn Regulations brought in obviously to stop workers exercising EU rights similarly to the way in which they exercise UK contractual rights.
The true culprit, however, is not the businesses. It is the law. Businesses may have practised in the uncertain lands of the employment status. But, business will face huge bills that may threaten their survival or their model – that benefits no one. The culprit, as I have long said, is the uncertain domestic test for employment that creates all this doubt as to what a worker is and the fact that employers don’t seem to understand, perhaps because lawyers don’t, that the EU test for a worker is considerably more inclusive than the domestic test. For instance, there may be a different result for the Deliveroo riders who recently failed at the Central Arbitration Committee under Fenoll.
Whatever the position, the death of holiday pay litigation has been greatly exaggerated. My final plea is that if you are a lawyer reading this then one should explain to clients – Respondents or Claimants – the EU right to holiday pay means what it says.