Holiday pay is back in the legal press this week with the EAT’s decision in The Sash Window Workshop Ltd & Anor v King. This case considered whether the principle that an employee can carry over holiday in to the next leave year if prevented from taking it due to sickness in the current leave year, would apply in other circumstances.
Regulation 13(9) of the Working Time Regulations 1998 states that holiday to which a worker is entitled must be taken in the respective leave year it falls due, and that it may not be replaced with a payment in lieu except upon the termination of employment of a worker. The Regulations do not provide for carry over. In NHS Leeds v Larner, the ECJ held that where a worker is unable or unwilling to take holiday because he was on sick leave and as a consequence did not exercise his right to annual leave, then the holiday in question may be carried over to the next leave year. The court also suggested that where a worker’s employment is terminated and on the termination date he remains entitled to leave in respect of any previous leave year which was carried over because of sick leave, the employer shall make a payment in lieu equal to the sum due for the untaken period.
Touching briefly on the facts of the sash windows case, Mr King worked as a commission-only salesman for The Sash Window Workshop Ltd from June 1999 until the termination of his contract in 2012. He claimed that he had been deterred from taking his full holiday during this period because he was not paid for holidays. He subsequently brought a claim in the employment tribunal for unpaid holiday pay under the Working Time Regulations 1998 (WTR 1998). He submitted that a worker who was not being paid for periods of annual leave was deterred from exercising that right, relying on the recently decided case of Lock v British Gas Trading Limited, the ramifications of which are set out in Rachel’s and David’s recent blog posts. (Holiday pay - the EAT decides and More Holiday Pay (as promised!))
The tribunal awarded Mr King holiday pay under three headings:
- Holiday Pay 1 – payment representing the amount of holiday accrued but untaken at the date of termination for the current leave year;
- Holiday Pay 2 – payment for unpaid leave requested and taken in previous years, claimed as a series of unlawful deductions from wages; and
- Holiday Pay 3 – payment in lieu of untaken leave that he said had accrued in previous years. In awarding ‘Holiday Pay 3’ the tribunal relied on the principle established in Larner. The tribunal saw no difference between a worker being unable to take paid leave due to sickness and a worker being denied paid leave.
The EAT allowed an appeal against the tribunal’s decision to award ‘Holiday Pay 3’, and remitted the case back to the same tribunal. The EAT held that the tribunal had not made sufficient findings of fact to support its conclusion that if the worker had asked for paid holiday it would have been rejected. Accordingly, it held that there was no basis for finding that Mr King had been unwilling or unable to take paid leave for reasons beyond his control. There was therefore insufficient reasoning for setting aside the usual position under the WTR 1998 that unused leave entitlement expires at the end of the leave year.
Whilst allowing the appeal, the EAT’s judgment seems to leave open the potential for a worker to claim that holiday is carried over into the next year of annual leave and/or for a payment on termination of their employment in lieu of that untaken leave entitlement, in circumstances where an individual is unable to take their holiday for reasons beyond their control. This would have the effect of expanding the scope of the principle established in Larner.