Carry over holidays

The Working Time Regulations (WTR) state that leave can only be taken in the year when it is due and cannot be carried over. In King v The Sash Window Workshop Ltd and anor, the Court of Justice of the European Union (CJEU) held that employers who do not allow workers to take paid holiday during their employment will be liable for unpaid European holiday pay up to and including when the employment relationship ends.

Basic facts

Mr King worked on a “self-employed” commission-only contract for Sash Window Workshop Ltd from June 1999 until October 2012 when he retired. 

When this relationship ended, Mr King brought claims for holiday he had accrued but not taken when his employment ended; holiday taken between 1999 and 2012 which remained unpaid; and holiday he had not been allowed to take during the relationship. Sash Window Workshop Ltd argued that, as a self-employed contractor, he was not entitled to holidays. 

Decisions of lower courts

The tribunal held that, as Mr King was a “worker” within the meaning of the WTR, he was entitled to the three types of holiday pay claimed. However, the EAT (see weekly LELR 404) overturned that decision on the basis that the tribunal had failed to establish whether Mr King was prevented from taking annual leave for reasons beyond his control. 

The Court of Appeal asked the CJEU to decide whether, in a dispute between a worker and their employer about whether the worker is entitled to annual leave with pay, the worker has to first take the leave before they can establish whether they are entitled to be paid.

Decision of CJEU

The CJEU noted that the purpose of paid holiday is that a worker’s salary when on leave should compare with the salary paid when working. A worker who is uncertain of their pay due during their holiday would not benefit from the leave as a period of relaxation and leisure and that may dissuade them from taking their leave. A practice that may deter a worker from taking leave is incompatible with EU law.  

The CJEU stated that workers, such as Mr King, who are unsure whether they are entitled to annual leave are forced into a situation where they have to take leave without pay and then bring proceedings to claim payment for it. This was incompatible with EU law.

It also held that, in a situation where a worker has not been allowed to exercise the right to paid holiday, EU law precludes provisions (such as in the WTR) whereby they are prevented from carrying over (and accumulating) paid annual leave rights over several consecutive periods of time until their employment ends.

In terms of the time limit for claiming payment for those carry-over periods, the court made clear that there was an important difference between the situation in which Mr King found himself and that of workers who are prevented from taking their annual leave because of sickness. Where a worker is off sick, the Court held that it was important to protect the employer from the risk that they could be away from work for a long time. As such, it had been established that their right to carry over annual leave was limited to 15 months.

The Court therefore held that unlike a situation where the worker was unfit for work due to sickness, employers who do not allow a worker to exercise their right to paid annual leave must “bear the consequences” in the sense that they could face a major claim for holiday back pay.