Another court decision on holiday pay – when does it apply?

You may have seen recent media coverage of a court decision involving Pimlico Plumbers and suggestions that this could open the floodgates for back-dated holiday pay claims. But as with many of these cases, it is always worth taking a look at the detail to see what particular situations it could apply to, and whether it is something that need concern you.

In the latest twist of a long-running saga over the employment status of plumbers working for Pimlico Plumbers, one of them, Gary Smith, had already succeeded in his claim that he was misclassified as a self-employed contractor while working with Pimlico. It had already been decided that he was in law a worker, and therefore entitled to additional rights like paid holiday.

This latest Court of Appeal decision relates to whether Mr Smith was entitled to claim back-dated holiday pay going back several years, for holiday which he did in fact take, but which was unpaid as he was being treated as self-employed.  The Court of Appeal has now ruled that even though Mr Smith took the unpaid holiday, he was still entitled to carry over his paid holiday rights as a worker over several years and claim compensation for the non-payment of holiday on the termination of his contract.  He was also not limited in how far back his claim for holiday pay could go.

Crucially, the court ruled that the burden is on the employer to:

• give workers the opportunity to take the annual leave,
• encourage them to take annual leave, and
• inform them that if they do not use it by the end of the current leave year it will be lost.

If the employer cannot show each of those three points, the worker’s right to paid leave will carry over and accumulate until termination.

Getting holiday pay right is one of those legal headaches that many employers struggle with, but this case is not about the correct calculation of holiday pay, but whether a claim for holiday pay can be carried over in this particular factual situation.  The case still centres around the basic principles of whether someone working with you as a consultant or independent contractor is genuinely self-employed, or is rather in reality the more protected category of worker.

The decision in this Pimlico Plumbers case could affect employers in the following situations:

• they are working with someone on a self-employed basis who is in law a misclassified worker, especially in the gig economy,
• that person, previously treated as a self-employed contractor, has claimed worker status,
• their contract has terminated,
• they have either taken unpaid holiday or have not taken holiday where the fact of it being unpaid was a deterrent to taking the holiday, and
• they have brought a claim in relation to elements like holiday pay within three months of their contract terminating.

It is also worth pointing out that this decision only applies to the statutory 4 weeks’ holiday period stipulated under the European Working Time Directive rather than the full 5.6 weeks’ holiday provided for under the UK Working Time Regulations.

So, in our view, the biggest take away from this court decision, for most smaller employers, is to regularly review your existing workforce arrangements if you operate with any self-employed staff, as it is not always clear whether they are self-employed or, in fact, in the more protected category of worker.  This will involve reviewing any existing contractual documents with these staff to ensure that they correctly reflect the reality of your working relationship.

For example, if you currently have independent contractors or consultants but the reality is that they are embedded in your organisation and you exercise a large degree of control over how they carry out their services, their employment status may actually be that of a worker or even an employee depending on the situation. It is also important to be aware that the courts will look at how your working relationship works in practice and not necessarily on what you call it in the written contract.

Can we help?

If you need help reviewing employment status or assessing contracts, our HR Consultants can help. You can get in touch on 0333 014 3888 or through email at help@citrushr.com.

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