A recent European Court of Justice (ECJ) ruling concerning holiday pay has highlighted the employment rights of workers who categorise as self-employed.
The effect is extension of those rights, which has potentially costly implications especially for employers with self-employed workforces.
Payment for accrued leave
Mr King, a commission-based salesman, took unpaid holidays of about two weeks a year during the 13 years he worked for Sash Windows until his dismissal in October 2012. He brought a case to the employment tribunal, which ruled that he was a worker and was entitled to paid leave for the whole of his period with the company under the Working Time Regulations.
The matter of payment in lieu of accrued leave not taken was referred to the ECJ. The ECJ decided that Mr King was entitled to compensation for statutory holiday leave he had not taken during the whole of his 13 years’ service.
Currently statutory holiday entitlement under the European Working Time Directive – from which the UK Working Time Regulations are derived – expires at the end of each leave year. Workers lose the entitlement if they do not take the leave. The government is likely to legislate for the right of workers to carry forward paid annual leave when their employer does not put them in a position in which they can take it.
This decision is likely to lead to compensation claims, especially now there are no fees for bringing a case to the employment tribunal. Employers with self-employed staff may be able to review their terms of engagement to minimise the risk of them being classified as workers.
It may be preferable to grant all workers holiday pay and other employment rights from the outset, to avoid compensation claims later.