Employers who wrongly classify workers as self-employed may be liable for years of holiday back payments

December 12, 2017

 

The Court of Justice of the European Union has handed down a judgment in Conley King v The Sash Window Workshop Ltd and Richard Dollar (C-214/16) that could see many companies and other employers forced to make large back payments for untaken annual leave entitlements to workers who were wrongly thought to be self-employed.  

 

Mr King worked as a commission-only salesman for The Sash Window Workshop Ltd for 13 years. He and the company considered that he was self-employed. Although he sometimes took leave, it was unpaid, and he did not take as much leave as a worker is entitled to under the Working Time Regulations.  When he was dismissed upon turning 65, Mr King brought Employment Tribunal claims against the company, including several different deductions from wages claims.  One of these was for payment for annual leave that was not taken. The ET decided that Mr King was a worker, not self-employed.  It said he was thus entitled to paid annual leave under the Working Time Regulations and awarded him, inter alia, pay in lieu of all the untaken leave throughout his entire engagement with the company.  

 

The company appealed on the basis that Mr King had never requested to take his annual leave.  Mr King’s position was that he did not try to take his leave because he would have suffered the loss of earnings and it possibly also would have had detrimental effects on the working relationship.  The EAT held that a worker is entitled to carry over leave if he is unable to take it for any reason outside his control (not only sickness) and remitted back to the ET the question of whether the fact that Mr King was thought to be self-employed and would therefore not be paid for the leave constituted a reason outside his control.

 

The case then went to the Court of Appeal which referred several questions to the Court of Justice, including whether a worker has to take the leave without pay and with possible detrimental effects before being able to bring a claim to try to get payment for that leave. The Court of Justice said this would be incompatible with the right to an effective remedy and with the working time directive. The Court also held that national laws of member states could not prevent a worker from carrying over and accumulating, until termination, leave in cases where he was unable to take the leave because it was unpaid. Further, whereas a worker who is prevented from taking leave because of sickness must only be paid in lieu for a carry-over period of 15 months at the most, the Court of Justice said that as it is the employer’s responsibility to correctly classify the worker it would not be right to limit the carry-over period at all.  The two-year backstop in the Deduction from Wages (Limitation) Regulations 2014 will not apply in these cases, but there is also an interesting question of how a worker’s loss will be assessed where the annual leave was not taken and they continued to work and therefore be paid so have no straightforward financial loss.  This should be addressed when the case goes back to the Court of Appeal.

 

 

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