Holiday Pay and Independent Contractors

Employers, particularly those who engage the services of independent contractors will be interested to hear the latest in the long running case of Smith v Pimlico Plumbers. 

Back in 2018, the Supreme Court in 2018 concluded that Mr Smith was a worker, rather than the independent contractor that Pimlico Plumbers claimed. Mr Smith had taken holidays during his tenure at Pimlico Plumbers, unpaid, and that he was entitled to 5.6 weeks holiday per year.

The current case came before the Court of Appeal and judgment was handed down on 1 Feb 2022.

Workers and employees are entitled to 5.6 weeks paid holiday under the Working Time Regulations 1998 (WTR). This paid holiday consists of two parts, the first being four weeks' holiday under the European Working Time Directive (known as 'Euro leave') and the second, an additional 1.6 weeks' holiday under domestic law. 

This case deals only with 'Euro leave' (as the additional 1.6 weeks leave expires at the end of each period). The question being asked by the Court of Appeal was in relation to whether Mr Smith could recover retrospective holiday pay, and specifically whether the decision in ECJ case of King v Sash Windows (2018) meant that he could only recover holiday pay for holiday that he had not taken (rather than that which he had taken but for which he was not paid).

The Court of Appeal held that the right to paid holiday was a “single composite right” to paid holiday, not two separate rights. If the worker or employee is forced to take unpaid holiday when they are in fact entitled to paid holiday they are not able to exercise the right to paid holiday. This meant Mr Smith’s claim applied to both pay for the holiday he had taken (as unpaid leave) and the remainder of his entitlement that had not been used at all.

As to whether he was time barred from claiming this at all, the Working Time Directive says that the worker must have the opportunity to take the holiday in order for it to lapse - and as Mr Smith had not been given that opportunity, and therefore it had carried over and accumulated until the termination of the employment relationship.
Employers should therefore be aware that if there is any debate as to whether an independent contractor may actually be a worker or employee, individuals could bring claims for holiday pay on termination of the contract.

Employers should also be reviewing current employment contracts of employees as well as holiday policies and practices around approving and encouraging holidays to ensure that staff are genuinely able to take their paid holiday entitlement.

Posted on 03/16/2022 by Ortolan

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