Court of Appeal – claims for unpaid holidays can go back many years

David Reid
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You may recognise the case name, Smith v Pimlico Plumbers from reading previous JEL Alerts.

Mr Smith previously successfully argued that he was a worker, rather than engaged on a self-employed basis. When engaged by Pimlico, Mr Smith took holidays, which were not paid by Pimlico because they considered him to be self-employed. Mr Smith, having established that he was indeed a worker, sought to be paid for the annual leave that he had taken, but not been paid for, during his engagement.

The Court of Appeal held that Mr Smith could recover holiday pay for all of the unpaid annual leave that he had taken throughout this engagement, without limit.

There are five important points to note from this decision:

1. To succeed in this particular type of claim, a worker must have taken leave that was unpaid. If they have done so, that unpaid leave will be carried over from one holiday year to the next.
2. There is no limit on the number of years for which that unpaid leave can be carried over. Therefore if, for example, a worker was engaged for ten years and took four weeks’ unpaid holidays every year during that time, they could claim for 40 weeks’ paid leave.
3. All that is required, from a timing perspective, is for the claim to be raised within three months of termination of the employment/engagement.
4. This case concerns the right to paid annual leave under the EU Working Time Directive (four weeks’ leave per year), and not to the additional leave provided under the Working Time Regulations (1.6 weeks’ leave per year).
5. Whilst not the focal point of the case, the judgment casts doubt on whether it is still good law that a gap of more than three months between one underpayment or non-payment of holiday pay and the next one will time-bar any claims further back in time.

You can see, therefore, that the potential liability arising from this case is significant.

Businesses who engage individuals on a self-employed basis and don’t pay any holiday pay to them should consider this judgment carefully. It may well be worth taking advice on whether their self-employed status is likely to stand up to scrutiny if challenged in the future. Just Employment Law is well-placed to assist you in assessing these issues.

The full judgment can be read here.

If you have any questions regarding this update, or if you require support or advice on any other employment law matters, please do not hesitate to contact Just Employment Law on 0141 331 5150 or enquiries@justemploymentlaw.co.uk.

Topics: Holidays