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Backdating holiday pay – the implications for workers

The ruling in the case of King v The Sash Window Workshop Ltd and anor will have significant implications for the right to holiday pay in the UK. It opens the door for up to 80 weeks’ backdated pay, with claims potentially extending as far as 1996 when the Tinme Directive came into force.

It suggests that workers who are wrongly classified as self-employed contractors may be able to claim back pay in respect of unpaid annual leave going back many years when their ‘worker’ status is established.

The European Court of Justice has held:-

  • That the means of enforcing the right to paid holiday under the UK’s Working Time Regulations 1998 SI 1998/1833 is incompatible with the EU Working Time Directive (No.2003/88). Prior to this ruling on the EAT’s interpretation of the Regulations, where an employer grants only unpaid leave to a worker, the worker would be obliged to take leave without pay and then bring an action to claim payment for it. Some workers could not afford to take leave without pay such that only better off workers could enforce their right to paid holiday. This result was held to be incompatible with the right to paid annual leave under Article 7 when read with the right to an effective remedy under Article 47 of the EU Charter of Fundamental Rights (which concerns the right to an effective remedy in determining civil rights or criminal charges).
  • That the worker’s holiday rights carry over until the termination of employment where those rights have not been exercised over several consecutive leave years because the employer refused pay during that leave. Previously in the case of a worker who is prevented from taking paid annual leave due to sickness, case law has permitted national law to limit the worker’s right to carry over that leave to 15 months.

The ruling also suggests that the Deduction from Wages (Limitation) Regulations 2014 SI 2014/3322, which limit back pay claims to two years, are incompatible with EU law.

There must also now be doubt as to whether the EAT’s decision in Bear Scotland v Fulton, which held that Employment Tribunals cannot award back-pay for unpaid annual leave beyond any 3 month break in unpaid EU holiday leave (4 weeks per annum not the full 5.6 weeks of leave permitted by UK legislation) can survive this decision.