Workers denied holiday pay altogether, may claim unpaid holiday pay for the duration of their employment following termination, whether they took holiday or not

In Smith v Pimlico Plumbers [2022] EWCA Civ 70, the Court of Appeal upheld the appeal of Mr Smith and overturned the decision of the Employment Tribunal (‘ET’) and Employment Appeal Tribunal (‘EAT’) to rule that a worker, having been told that he had no right to paid leave, was entitled to bring a claim in respect of all unpaid holiday accrued throughout his engagement, both taken and untaken following termination of their engagement.

Mr Smith worked for Pimlico Plumbers from August 2005 to May 2011 under a self-employed contract with no entitlement to paid leave. He took periods of leave, unpaid and after being suspended, brought an 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 Mr Smith was a worker and his claim for unpaid holiday pay was remitted to the ET.

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, Mr King had not taken statutory leave, he 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.

In the ET, Mr Smith’s claim was dismissed on the basis that the unpaid holiday pay claim was out of time in accordance with the strict timeframes for bringing such claims. Mr Smith appealed the decision, relying on King. The EAT dismissed the appeal on the basis that in King, the right to paid leave was not exercised, the worker didn’t take leave because it was not paid, whereas Mr Smith had partially exercised the right to paid leave because he 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.

The Court of Appeal held that:

• The right to paid holiday under the Working Time Directive is a "single composite right", rather than a right to leave and a separate right to payment for that leave.
• The ET had been wrong to hold that King did not apply to the claim, King applies to workers who do not take leave because it would be unpaid, but also to workers who take unpaid leave.
• Pimlico Plumbers’ approach had prevented Mr Smith from exercising his right to paid holiday throughout his contract. His right had accumulated and crystallised upon termination of his contract.
• Mr Smith’s claim was in time because it had been brought within three months of termination of his contract.

The decision is relevant to individuals challenging their status as self-employed and acts as a reminder to employers of the importance of getting employment status correct from the outset.

The decision is limited in its scope, it only applies to the right to four weeks leave under the WTD, and in cases in which the employer denied the right to paid holiday altogether. In relation to the additional 1.6 weeks leave and workers who claim to have been underpaid their holiday pay, workers must demonstrate a series of deductions not broken by a gap of three months. For these claims the two-year backstop on deductions claims would still apply.

The decision means that a worker, having been told that they had no right to paid leave, is entitled to bring a claim in respect of all unpaid holiday accrued throughout their engagement, both taken and untaken, following termination of their engagement.

Further to our article following the EAT judgement in Smith, where workers are denied the right to paid holiday they can carry over the right from year to year.