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King v Sash Windows ECJ - Why we brought the case & what employers need to know
Sash Windows holiday pay case - Here’s why we brought the case any why employers need to take note – Comment by Peninsula Head of Legal James Potts

“The ECJ has decided that a worker is entitled to carry over and accumulate their accrued but untaken holiday where the employer doesn’t allow the worker to exercise their right to paid leave. This carry over right is not subject to any limitation, such as the restriction on leave not taken because the worker was sick, and cannot be extinguished. In addition, under EU law, the worker is not required to take the leave first before establishing whether they have the right to be paid for the leave. In essence, this decision means that the worker was entitled to carry over their untaken holiday for the whole of their 13-year engagement. At termination, they would be entitled to a payment in lieu of this carried over leave. The case was brought by Peninsula as we wanted to seek a decision in this case as it was an untested, grey area. We didn’t want other small employers to be in the same situation as our client where they are facing the risk of having to pay many years of back pay because the law is unclear. The significance of the impact of the judgment was recognised by the UK government, who supported our attempt to clarify the law.”

“Following the confusion regarding holiday pay calculations, this is the next big holiday issue for employers to grapple with. This decision will have a significant impact on cases where the status of the individual is disputed. Where it is decided, a number of years down the line, that a self-employed individual was actually a worker the employer will face significant financial liability. They will have to compensate for taken but unpaid holiday during the relationship and will also have to pay for accrued holiday that wasn’t taken throughout their engagement.

Employers with self-employed individuals, whether these number in single figures or the thousands, need to seek advice on the real status of their workforce. Although contractual documents may be drafted to create a self-employed relationship, a tribunal can look behind this to examine what actually happens in practice. Once a decision is made that the individual is actually a worker or an employee, liability for significant holiday back pay will arise”

“In acknowledgement of the significant impact holiday pay claims can have, since July 2015 the government has limited back pay liability for new claims to two years. This reduces the financial impact of the decision for small employers but does not remove the risk of being taken to a tribunal. Since the removal of fees, there is nothing stopping a self-employed individual from submitting a tribunal claim to test their status, or seek a financial settlement.”

“This European decision binds UK tribunals when deciding similar cases. In its current form, the Brexit Withdrawal Bill maintains European judgments made before the UK’s exit from the EU. However, it does give the Supreme Court the right to depart from these decisions where it is right to do so. As such, this decision will remain binding post-exit unless a future case proceeds through the domestic courts to the Supreme Court, where this decision could be departed from.”


About Peninsula

Peninsula is one of the UK's premier companies, started in 1983 by Salfordian Peter Done with headquarters on the fringes of Manchester city centre. The company offers HR, employment law and health & safety support services to small and fast-growing businesses across the country, as well as tax and payroll advice, employee assistance programmes, and HR and health & safety training. Since its beginnings in Salford, Peninsula has now expanded into the furthest corners of the globe, operating in Ireland, Australia, New Zealand and Canada.