ECJ ruling could leave gig economy firms facing years of back holiday pay bills (UK)

Firms which routinely use staff on self-employed contracts who are later deemed to have worker status could face massive liabilities for years of back holiday pay as the result of a European Court of Justice judgement.

‘European Court of Justice: King v The Sash Window Workshop Ltd, Judgment 29 November 2017’ involves Conley King, a commission-only salesman for the Sash Window Workshop Limited between 1999 and 2012.

Mr King worked without a paid holiday during these 13 years, under an arrangement which – according to the company – ‘suited him’. In 2008, it offered him an employment contract, which he turned down.

After he left the company in 2012, he brought various claims against it and an Employment Tribunal ruled he was a worker for the purposes of UK working time legislation and therefore entitled to annual leave with pay or payment in lieu of leave.

He then brought a claim for £27,000 back holiday pay. This was refused by the Employment Appeal Tribunal, which found no evidence that he gave any notice of his intention to take holiday that was then refused by the company.

Mr King referred the case to the Court of Appeal, which asked the ECJ to rule on whether EU law allowed him to claim payment for his entire 13 years’ employment.

The ECJ ruled that anyone deemed under EU law to have ‘worker status’ must be able to carry over paid annual leave without any time limit on their claim. As workers’ entitlement to pay in lieu of holidays arises all at once on termination of their employment, the 2-year time limit on claims for back holiday pay introduced by ‘The Deduction from Wages (Limitation) Regulations 2014’ is also ineffective.

It also clarified that

  • workers who are denied their entitlement to paid annual leave under the Working Time Regulations do not have to take unpaid leave first before they can take legal action to be paid for it
  • Sash Window Workshop’s ignorance of King’s employment status was no defence for not paying his holiday or sick pay

Legal analysts consider the ruling could have significant implications for the gig economy – while Dr Moyer Lee, head of the Independent Workers of Great Britain trade union, hails it as a ‘bombshell judgment’ and a ‘game changer’.

The case now returns to the UK Court of Appeal for a further ruling which will shed more light on its potential impact on employment practices.


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