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Holiday pay case of "self employed" worker settles leaving employers in the dark about liabilities

The case of King v Sash Windows raised important issues about the rights of workers to recover holiday pay where they were wrongly treated as being self employed.  

In December last year, the Court of Justice of the European Union (CJEU) said that workers who have not taken paid leave because they have been wrongly treated as self-employed contractors can obtain compensation for accrued holiday – even if this goes back many years. This is because employers are obliged to carry out an assessment of the employment status of their staff and if they get this wrong (as they did here), they “must bear the consequences”. 

The case was remitted back to the Court of Appeal to determine if the Working Time Regulations can be interpreted to give effect to this decision and, if so, how much compensation to award to Mr King. 

Unfortunately, the case has been settled. This means that we don't have any authoritative guidance to help employers calculate the holiday pay of workers who haven't taken leave (or as much leave as they were entitled to) in a scenario such as this.

As we explained here,  it is relatively straightforward to work out how much holiday pay someone should have received if they actually took unpaid leave (assuming there are records which go back that long). But, it is more difficult to work this out for someone who has worked and not taken any holiday. Do you have to pay this at their "normal" rate of pay (which Sash Windows' legal team said would amount to "double recovery") or can you pay "compensation" to reflect the loss of enjoyment and welfare benefits - and if so how is that valued? These sorts of arguments will continue to be raised until we have a definitive judgment.

Why the case settled

Cases settle for lots of reasons. Employers are understandably less interested in the legal principles at play and focus on cost and the risk of losing.

The Working Time Regulations only provide workers with a remedy if they have taken leave which has not been paid at the correct rate, or at all. This is incompatible with the Directive which makes it clear that workers should be able to bring claims even if they haven't taken leave. Therefore, to avoid liability, Sash Windows had to convince the Court of Appeal that it could not read words into the Regulations to give effect to this judgment. 

It must have been willing to give this argument a shot. But, two recent CJEU decisions make it extremely difficult to now argue this. In Bauer et al, the CJEU said that domestic courts and tribunals must interpret their laws to give effect to the EU Charter on Fundamental rights. This provides that "every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave." This means that even if our own laws are incompatible with the Charter, workers can bring claims against both public and private employers based on this right.

Once this argument was removed, the only thing left to argue about in Mr King's case was how much he would recover and the parties have managed to agree this (amongst themselves).

The impact of Brexit

If the case had been heard after 29 March next year, it might still have gone ahead.

The Withdrawal Act makes it clear that the EU Charter will not form part of UK law once we exit the EU. This means that workers will not be able to bring claims based on it or use it to disapply domestic legislation. 

We can help

Many workers are now bringing holiday pay claims. We have strategies you can use to minimise your financial exposure to claims by "self employed" workers, and those in respect of overtime, bonuses and commission payments. Please contact our holiday pay expert Glenn Hayes for more information: or 44 (0)113 218 6484.

Our fixed fee service

If you are interested in finding out about how we can support you with our fixed-fee annual retainer, or flexible discounted bank of hours service, please contact Rachel Hetherington: rachel.hetherington@irwinmitchell.comor: 44 (0)121 203 5355 for a no obligation quote.