The European Court of Justice gave judgment recently in a UK case which could have a significant impact on UK employers. The impact of this decision is that “employers” may potentially face a claim from workers for unpaid holiday going back to 1998 when the Working Time Regulations came into effect.  This would be in relation to four weeks “euro leave” each year and could amount to very significant sums indeed. The case may encourage the current increase in claims challenging gig economy employment status as, of course, it will increase the stakes considerably.

Tim Lang, Head of the Employment Team at George Green, explained “Mr Conley King worked for the Sash Window Workshop and was working on a self-employed commission only contract from 1999 until he retired in 2012. He was paid on a commission only basis. When he took holiday it was unpaid. When his contract ended he went to the Employment Tribunal to recover payments for annual leave for both the annual leave he had taken and had not been paid for as well as the holiday leave that he had not taken for the entire period that he was employed.”

Mr Lang continued “The Employment Tribunal found that he was a worker and therefore entitled to paid holiday. The matter went to the Court of Appeal who referred the matter to the European Court of Justice. The question asked was whether it was compatible with EU law for a worker to have to take leave first before being able to establish whether he was entitled to be paid.

The Court said that every worker had the right to have paid annual leave which was regarded as a particularly important principle of EU social law.  It is not right that a worker be forced to take leave without pay and then bring an action to claim payment for it. EU law precluded a situation where a worker had to take his leave before establishing whether he had a right to be paid in respect of that leave or not and importantly, the Court found that EU law precluded national provisions preventing a worker from carrying over accumulating holiday pay. “

Mr Lang concluded “The Court referred to previous decisions in relation to sickness absences where it had found that EU law did not preclude national practices limiting the accumulation of entitlement to paid annual leave by a carry over period of 15 months, at the end of which the right is lost.  However, this was not appropriate to situations like Mr King’s where the employer had been able to benefit from the fact that Mr King had carried on working. They found that a employer that does not allow a worker to exercise his rights to paid annual leave must bear the consequences.”

Employers who are affected by this decision should take urgent legal advice.