In a significant recent decision, the Employment Appeal Tribunal has decided that workers are not entitled to payment on termination for annual leave which has been taken but not paid for in previous years.
The case centred on the application of an earlier decision from the European Court of Justice, which established that workers who had been deterred from taking statutory holiday (because they had been mis-categorised as self-employed) could carry it forward for the whole life of the contract and would be entitled to payment in lieu on termination. The question the EAT had to decide was whether a similar principle applied to a worker who had actually taken holiday, despite the fact that it was unpaid.
Mr Smith had worked for Pimlico Plumbers from August 2005 to May 2011. During the course of the engagement, Pimlico Plumbers maintained that he was an independent contractor and therefore not entitled to paid annual leave. Mr Smith did however take some unpaid leave during this time. After his contract terminated, Mr Smith brought a number of claims in the employment tribunal.
One of his claims related to payment for his backdated unpaid annual leave. The initial question to be determined in this case related to Mr Smith’s employment status. In June 2018, the Supreme Court confirmed that he was a worker, not an independent contractor. The case then returned to the employment tribunal where Mr Smith’s holiday pay claim was dismissed, on the basis that it had been brought outside the statutory three month time limit.
The EAT has now upheld this decision. It has declined to extend the principle established in earlier case law to Mr Smith’s situation, saying that there is a legitimate distinction to be drawn between a worker who has been deterred from taking any leave at all because of his employer’s refusal to pay for it, and a worker who was able to take unpaid leave.
While the decision will have come as a welcome relief to both Pimlico Plumbers and other employers around the country, we understand that the Mr Smith has been given permission to appeal. It is therefore likely that this long-running litigation will continue for a while longer.