When holiday means holiday! The Coca-Cola truck is winding its way around the country bringing cheer and a huge sugar rush. However, just as the champagne cork pops that pesky European Court of Justice drops a ticking time bomb that has potential ramifications for those involved in the gig economy and might encourage those who are currently regarded as self-employed to challenge their employment status!
What is the fuss about?
The right of a commission based double glazing salesman, (Mr King) terminated after 13 years at age 65 to holiday pay for the whole period of his association with the business!
Mr King claimed he was a worker and the employment tribunal agreed. They stated he was entitled to be paid for leave he had taken unpaid. Given throughout the whole period he had not received any holiday pay, he also claimed pay for all holiday he was entitled to over that 13 years with the business. The business accepted that he was entitled to holiday pay for the current year but claimed that all others were time-barred.
After the inevitable cycle of appeal success, the case went to the European Court of Justice who decided in principle that King should be compensated for all untaken leave that had accrued during the time he worked with the employer.
The Court’s reasoning reflects an increasing acknowledgement of work-life balance.
“That workers must be entitled to benefit from the remuneration which would otherwise be paid when on holiday. A worker who is faced with uncertainty as to holiday pay would not be able to benefit fully from that holiday and would thereby be dissuaded from taking holidays”.
Fundamentally, European law excludes the proposition that a worker must ask for and then be refused leave before being entitled to make a claim in a court or tribunal. The crucial decision by the court, however, in this case, is that there is no reason why when the business employer has no arrangements to allow workers their rights to paid leave, that any claims for holiday pay could not be backdated to the point when the entitlement started. So a person who is a worker for 20 years, with no paid holiday, potentially has carried all that holiday forward until termination and will be entitled to payment in lieu, due then.
The potential impact on many businesses is serious. Individuals who have been wrongly classified as self-employed (without entitlement to paid holiday) but are workers, could claim back pay for unpaid holidays for the years they were workers and seek payment upon termination for each year's holiday entitlement.
The situation is further confused by concern the legislation limiting claims for back pay for holiday’s to two years, might also be a breach of European Law. Only time will tell how this is dealt with in the UK by Courts and Tribunals.
In the meantime, what can be done?
- Take a deep breath and think about how you’ve classified staff.
- Look at the rights they have received.
- Going forward, be careful to identify the types of individual engaged and what their legal entitlement is.
- Failure to provide rights, such as paid holiday to workers could be an expensive mistake.
By taking stock now and ensuring all engaged have the correct rights appropriate to their status is minimising the risk.