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Carrying over Holiday Pay

The Advocate General has given his opinion in the case of King v The Sash Window Workshop Ltd and another that a worker is entitled to holiday pay on termination for any periods of annual leave that has accrued during employment, which the worker has been discouraged from taking because it would have been unpaid.

The Case

Mr King worked for The Sash Window Workshop Ltd (“Sash”) as a commission-only salesman for 13 years. He received no salary and was never paid for any holidays or periods of sickness absence. After nine years, Sash offered him an employment contract under which he would be entitled to paid annual leave, but Mr King refused. Sash terminated his contract when he reached 65 and he subsequently brought claims for age discrimination and unpaid holiday pay in the Employment Tribunal. Mr King’s case was that he had not taken his full annual leave entitlement each year because it would have been unpaid.

Mr King was awarded:

  • Leave accrued but untaken up to the date of termination in the current leave year;
  • Leave required and taken in previous years, claimed as a series of unlawful deduction from wages; and
  • Leave accrued but untaken in previous years.

Sash appeal the Employment Tribunal’s decision and the Employment Appeal Tribunal upheld Sash’s appeal against the Tribunal’s decision to award Mr King pay in respect of leave accrued but untaken in previous years. It held that the Tribunal had made no findings of fact that Mr King had been prevented by reasons beyond his control from taking annual leave.

Mr King appealed to the Court of Appeal, who referred the following questions to the European Court of Justice:

  1. Is regulation 13 of the Working Time Regulations 1998 consistent with Article 7 of the Directive, given that a worker has to take unpaid leave before they can establish whether they are entitled to be paid for that leave?
  2. If a worker does not take some of their annual leave entitlement because their employer refuses to pay them during annual leave, can the worker claim that they were prevented from exercising their right to paid leave so that the right to leave carries over until the worker has the opportunity to exercise it?
  3. If the right does carry over, does it so indefinitely or is there a limited period during which the right must be exercised in the same way as workers who are unable to exercise their right to take leave because of sickness?
  4. If there is no statutory or contractual provision specifying a carry-over period, should the court impose a limit in order to ensure that the purpose of Article 7 is not distorted?
  5. If so, is a period of 18 months following the end of the holiday year in which the leave accrued compatible with Article 7?

The Advocate General gave an opinion that supported Mr King’s arguments on all the questions referred.

So what does this mean?

Where a worker does not use their entitlement to paid holiday because they would not be paid by their employer, the worker can claim they were prevented from exercising their right to such paid leave. The right then carries over until the worker has had the opportunity to exercise it – in the case of Mr King on termination of employment.

The worker does not have to ask to take their leave first before being able to establish whether they are entitled to be paid for it because the risk of not being paid for the leave would be a deterrent to taking it.

The payment in lieu for untaken holiday entitlement should cover the full period of employment until termination of the employment relationship.

The Court of Justice of the European Union normally follows the opinion of the Advocate General so employers watch this space!

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