European court of Justice rules on holiday pay

Employers open to holiday pay claims after landmark decision

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Any business that engages people on a self-employed or sub-contractor basis could be at risk of having to pay out thousands of pounds in backdated holiday pay, following a landmark decision by the European Court of Justice in the case of The Sash Window Workshop and another v King.

Mr King started working for The Sash Window Workshop in 1999 as a self-employed salesman, working on a commission only basis and receiving no pay when he was on holiday or ill.

In an early decision in the Employment Tribunal it had been determined that Mr King’s actual status was that of a ‘worker’ rather than being self-employed. As such, Mr King was entitled to annual leave with pay, although his claim was limited to pay for holidays accrued over his last 2 years at The Sash Windows Workshop due to there being a time backstop on holiday pay claims under UK legislation.

However, following a referral from the Court of Appeal the ECJ in its landmark judgment has subsequently ruled that the 2 year backstop on holiday pay claims is incompatible with EU law.  In doing so determining that Mr King should have been paid for annual leave throughout the 13 years of his engagement with The Sash Window Workshop.

What does this ruling mean for employers?

This decision means that employers who regularly engage staff on a self-employed basis could be potentially facing huge financial liabilities. Claims for backdated holiday pay over a period of 20 years may be successful should a Court deem individuals to be ‘workers’ rather than self-employed.  Consequently, an employer may be at risk of successful holiday pay claims from workers amounting to 80 weeks’ pay per worker.

If you are an employer who engages individuals on a self-employed or subcontractor basis and would like to receive legal advice on the risks involved, you can call our experienced employment solicitors on 01282 695 400.

What action do employers need to take?

The judgement in The Sash Window Workshop case made it clear that the employer’s ignorance on Mr King’s employment status was no defence for not paying him holiday pay.

As an employer, even if you are unaware that staff should be seen as workers rather than self-employed, you could still be liable for backdated holiday pay. This makes it vital that employers speak to a specialist employment solicitor for advice on the worker status of anyone employed on a self-employed contract.

Whilst it should be remembered this was a referral to the ECJ and therefore the case will now return to the Court of Appeal where the extent of employer’s holiday pay obligations should be made clearer, any employer with staff on self-employed contracts should seek legal advice as soon as possible.

How can LawforEmployers help you?

LawforEmployers are a division of Farnworth Rose Solicitors, a growing firm of solicitors in Lancashire.

Our experienced solicitors specialise in providing advice to employers on all aspects of employment law. By speaking to our legal experts you can receive advice on employee worker status and any steps you may need to take in light of this recent ruling.

How to contact the legal experts at LawforEmployers

If you’d like to talk to one of the specialist solicitors at LawforEmployers today, you can call us on 01282 695 400.

Or, if you’re unable to talk to us right now, you can arrange a call back by simply completing our quick online contact form here.