In a case referred to the Court of Justice of the European Union (CJEU) by the UK Court of Appeal, the Advocate General has given an opinion ahead of the CJEU considering the case, that a worker is entitled to carry over, or receive payment for, annual leave they are unable to take.

The Advocate General’s opinion in The Sash Window Workshop Ltd and another v King, is not binding on the CJEU which is yet to reach a final decision in this case. However, if it is followed by the CJEU, the decision will be binding on employers in the UK.

King joined The Sash Window Workshop Ltd in 1999 as a salesperson, working on a commission-only basis, receiving no pay when he was on holiday or on sickness absence.

In 2008, Sash Window Workshop offered King an employment contract, but he elected to remain “self-employed”. When he left in 2012, King brought various claims in the employment tribunal, including a claim for loss of holiday pay for the unpaid leave he had taken in some years, as well as pay for the holiday that he had accrued, but not taken, in other years. The tribunal found he was a “worker” and therefore entitled to paid holiday under the Working Time Regulations.

Sash Window Workshop appealed to the Employment Appeal Tribunal (EAT), on the issue whether the tribunal had been wrong in law to hold that King was entitled to receive pay in respect of the holiday that he had accrued, but had not taken, in previous years. The EAT indicated that workers should be allowed to carry over untaken holiday into the next year if they are genuinely prevented from taking annual leave for “reasons beyond their control” other than sickness absence. The EAT found no evidence that King had had requests for annual leave refused, and remitted the case to the Tribunal. King then appealed to the Court of Appeal.

The Advocate General’s view is that it is incompatible with European law, the Working Time Directive, to require a worker to take leave first before being able to establish whether he is entitled to be paid for it. If a worker does not take all or some of the annual leave to which he is entitled in the leave year, in circumstances where he would have done so but for the fact that the employer does not pay him for any period of leave he takes, the worker can claim that he is prevented from exercising his right to paid leave such that the right carries over until he has had such opportunity to exercise it. Further, upon termination of the employment relationship, a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave. If this never occurred, then an allowance is due to cover the full period of employment until termination of the employment relationship.

Fiona Coombe, SIA’s Director of Legal & Regulatory Research warned employers to consider the risk they might face from similar claims if their assessment of a contractor’s employment status is wrong. “This view, if followed by the CJEU, will mean that employers, who fail to pay holiday pay to workers on the assumption they are self-employed individuals and therefore not entitled to paid annual leave, may be hit by substantial claims at the end of the worker’s assignment”.

“Even if this view is not endorsed by the CJEU, it underlines the importance of employers making the correct determination of employment status when engaging an independent contractor.”