Carrying over holiday entitlement?

11 July 2017

At this time of year, employers will be dealing with annual leave requests and managing the workforce during the vacation period; this is never an easy task given the complex legal maze that the Working Time Regulations has created.

Carrying over holiday entitlement?

In the recent case of King v The Sash Window Workshop, the Advocate General has advised the European Union’s highest court that workers are entitled to paid leave and can claim compensation if they are prohibited from taking their holiday entitlement.

This case concerns a challenge brought by Mr King, a salesman who was paid entirely on commission. His contract described his work status as "self-employed" and did not specify if he was entitled to paid holiday leave. Mr King took varying amounts of annual leave each year but was not paid whilst on holiday.

Mr King’s contract was terminated in October 2012 upon him reaching 65, and he subsequently brought a claim for pay for the holiday he had taken and pay in lieu of holiday which he had not taken throughout his 13 years of working for the company. Mr King further argued that the fact he was not paid for holiday meant he was deterred from taking his full entitlement.

Mr King was successful in his claims for age discrimination and holiday pay, including pay for holiday leave for which no request for leave was made. The Sash Window Workshop challenged the award of the Employment Tribunal to make payment in lieu of the accrued but untaken leave throughout the whole period of Mr King’s engagement, in respect of which no request for leave was made.

The main issue the CJEU were being asked to clarify was whether workers have the right to "paid leave" or is it merely the "right to leave" and "pay for leave taken"?

The relevant EU provision regulating paid annual leave is Article 7 of the Working Time Directive (WTD): the right to at least four weeks of “paid annual leave”. This reiterates that the leave may not be replaced by a payment in lieu “except where the employment relationship is terminated”.

The effect of the WTR and the logic of the earlier decision of the EAT is that, in order for a worker to establish the right to "paid leave", they would first have to take unpaid leave and then, only after having done so, would they be able to test whether they are entitled to paid leave by way of bringing proceedings for unpaid wages.

However, the Advocate General stated that requiring a worker to take annual leave before being able to ascertain if he will be paid for it would be incompatible with EU law. In finding that employers must provide “adequate facilities to workers” to enable them to take their paid annual leave, the Advocate General found that putting the onus on employees would amount to requiring workers to take active steps to secure the creation of a facility for the exercise of the right to paid annual leave which ultimately would be excessively difficult to enforce.

Furthermore, the Advocate General ruled that in circumstances where an employer has not provided a worker with paid leave, the right to paid leave carries over until he has the opportunity to exercise it and on termination of employment the worker has the right to payment in lieu that remains outstanding.

Whilst opinions given by the Advocate General of the CJEU are not binding, they are typically followed by the full court, with a final decision being expected in the coming months. A ruling confirming the advance opinion would likely impose substantial costs on many UK firms that have engaged in similar employment practices. Therefore, employers should be wary and are advised to seek professional legal advice when reviewing the contractual provisions for annual leave within their contracts.

Maxine Orr is a Partner specialising in employment law in Worthingtons Commercial Solicitors.

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