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Holiday pay: right to indefinite carry over of holiday when worker takes unpaid holiday

Posted on 2 February 2022

Overview

The Court of Appeal has held that a worker who takes holiday but isn't paid for it is entitled to carry over the right to paid holiday indefinitely until the employer allows them to take it or until termination of their contract. The judgment has significant consequences for employers who do not pay holiday to those they believe are self-employed, when in fact they are workers who are entitled to paid holiday.

In detail

Gary Smith took holidays during his engagement with Pimlico Plumbers, but because Pimlico Plumbers incorrectly classified Mr Smith as self-employed, they did not pay him holiday pay.

Both the Employment Tribunal and the Employment Appeal Tribunal had rejected his holiday pay claim. They held that the ECJ decision in King v Sash Window Workshop - which said that a worker who doesn't take holiday because their employer won't pay for it is entitled to indefinitely carry over that holiday – didn't apply in cases where the worker actually takes holiday but isn't paid for it.  

The Court of Appeal disagreed, deciding that the Sash Window case "extends to cover the worker who takes unpaid leave because the employer refuses to recognise the worker’s right to paid leave and remunerate the leave". It is up to the employer to determine whether or not the worker is entitled to paid holiday, and if the employer gets the analysis wrong, it must bear the consequences. Accordingly, Mr Smith was entitled to claim for holiday pay looking back across his entire engagement.

In addition to bringing a holiday pay claim under the Working Time Regulations, workers are also able to bring an unlawful deductions claim covering a series of incidents of underpaid holiday stretching back over a period. Up to now, Employment Appeal Tribunal case law limited how far back that period could go, saying that a gap of more than three months between two incidents of underpaid holiday broke the series. The Court of Appeal has now given a strong provisional view disagreeing with this narrow approach. Accordingly a series of incidents of underpaid holiday is not broken just because there is a gap of more than three months between two incidents.

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