Employment Law Case Update: Holiday Pay Claims

Our Employment Law team today reviews the the landmark case brought by Mr Smith, a worker who claimed he was owed holiday pay by Pimlico Plumbers.

Mr Smith has successfully appealed against an Employment Appeal Tribunal (EAT) decision that his claim was made too late. He had previously successfully established that he was a worker, a decision that was upheld by the Supreme Court.

Mr Smith’s claim at the Employment Tribunal (ET) for unlawful deduction of wages in respect of pay for holiday that been taken but not paid for was dismissed on grounds that the claim was not brought within the relevant time limit. The EAT also held that Mr Smith had made his claim for holiday pay out of the relevant time limit. Under current rules, his claim should have been within three months of the end of each holiday period.

However, the Court of Appeal reversed this earlier ruling explaining that in cases where taking holiday is under dispute and where employers refuse to pay for it, workers only lose their entitlement to take holiday at the end of the year where employers can demonstrate that the worker was given the chance to take paid holiday, encouraged to take paid holiday and had been informed this entitlement ceases at the end of the holiday year. Where employers cannot demonstrate this, as Pimlico Plumbers failed to do, workers are entitled to be paid for the untaken holiday.

The Court of Appeal concluded that Mr Smith was well within his right to claim full payment in respect of all his taken but unpaid holiday over the six-year period that he worked for Pimlico Plumbers, and that his claim was brought in time as he was deprived of the chance to take paid holiday while employed.

The Court of Appeal also considered the current law that states gaps of over three months between non-payments and underpayments of pay breaks the ‘series’ of deductions in relation to unlawful deduction from wages claims, which restricts claims for backdated holiday pay. The fact this case demonstrated that the three-month gap did not break the series means that employers could receive claims for backdated holiday going back much further and even to the start of an individual’s employment.

This decision will be important for many workers with historic claims for unpaid or untaken holiday, including those working in the so-called "gig economy" as well as other workers wrongly classified as self-employed independent contractors.  Such workers may now be able to claim holiday pay back to the start of their employment, without having to rely on the “series of deductions” rules which would otherwise limit the value of historical claims. 

The key point is that, where a worker has been denied the right to paid leave throughout their employment, the right under the Working Time Directive accumulates from year to year, and crystallises on termination. For limitation purposes, this is not a series of deductions claim, but a claim for a single payment due on termination. This will also mean that the two-year backstop introduced by the Deduction from Wages (Limitation) Regulations 2014 (SI 2014/3322) for claims brought on or after 1 July 2015 will not apply.

It is important to highlight that this entitlement to claim for backdated holiday only applies to the four-week holiday entitlement that derives from EU legislation, and not to the additional 1.6 weeks’ holiday that UK law provides.

If you have any questions regarding this article, you can call our Employment team today on 023 8071 7717 or email employment@warnergoodman.co.uk.

This was previously part of our weekly Employment Law Newsletter. If you would like to subscribe, please email us at events@warnergoodman.co.uk or just fill in our subscription form.

ENDS

This is for information purposes only and is no substitute for, and should not be interpreted as, legal advice.  All content was correct at the time of publishing and we cannot be held responsible for any changes that may invalidate this article.