Date updated: Tuesday 6th July 2021

Summary

In the recent case of Smith v Pimlico Plumbers, the Employment Appeals Tribunal (the ‘EAT’) has confirmed that where a worker is permitted to take leave but not be paid for it, they do not have a right to carry over payment for the leave taken. While employers may have a potential liability for leave untaken by a worker where the employer refuses to offer paid leave, if a worker takes leave in spite of it not being paid, employers will not have a potential continuing liability for that leave if taken in previous years.

Case facts

The individual worked for the employer from August 2005 to May 2011 under a self-employed contract with no entitlement to paid leave. They took periods of leave, unpaid and after being suspended, brought an employment tribunal (‘ET’) appeal which included a claim for unpaid holiday pay for leave taken in previous years which wasn’t paid.

Previously, the Supreme Court had held that the individual was a worker and their claim for unpaid holiday pay was remitted to the ET.

Legal context

Workers are entitled to be paid during statutory leave at the rate of a week's pay for each week of leave, and subject to certain rules, have three months beginning with the date the payment should have been made to bring a claim for unpaid holiday pay.

In King v Sash Window Workshop Ltd and another, the individual had not taken statutory leave, they said, because it would have been unpaid. The case was referred to the Court of Justice of the European Union (‘CJEU’) which held that where a worker is deterred from taking leave by their employer e.g. an employer refuses to pay statutory leave, the employer must pay the worker their basic entitlement to paid leave, and there is no limitation on the period for which the worker can claim, because the employer must ‘bear the consequences’ of their action. The implication of the decision is that in such cases, a worker can claim holiday pay for leave not taken in previous years.

Decision

The ET dismissed the unpaid holiday pay claim for being brought out of time in accordance with the strict timeframes for bringing such claims. The worker appealed the decision of the ET on the basis that following King, the right to carry over paid leave extends not just to a worker who has been deterred from taking leave because it was unpaid, but to a worker who has taken leave despite it being unpaid.

The EAT dismissed the appeal citing key differences between the worker in King and the worker in the appeal, Smith. The right to carry over the paid leave relates to the right to paid leave not being exercised due to the employer’s actions, and thus the employer must bear the consequences of their actions. In King, the right to paid leave was not exercised, the worker didn’t take leave because it was not paid. Alternatively, in Smith, the EAT held that the right was partially exercised because the worker had taken leave, despite it not being paid, and there was no link between the worker taking the leave and the employer refusing to offer paid leave, because it would be illogical to say the worker took unpaid leave because the employer didn’t pay leave.

Implications

The decision is conclusive, at least for the time being. An employer will not be liable to pay a worker for leave taken in previous years, despite that leave being unpaid and the worker being entitled to paid leave. Where a worker takes leave and is not paid for it, as they are entitled, they must bring a claim within the strict time limit.

If, however, the employer does not offer paid leave and the worker doesn’t take leave, an employer may be liable to pay the worker for leave the worker was entitled to take in previous years but didn’t; the right to paid leave shall be carried over.

In June, the Supreme Court is expected to hear an appeal from the Court of Appeal in Northern Ireland; Chief Constable of Northern Ireland Police v Agnew. The case also concerns holiday pay, the Court may address the cases of King and Smith and so we will await that judgment.