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Does the right to paid annual leave carry over until the worker has the opportunity to exercise it?

Napthens - June 28th 2017

In the recent case of King V The Sash Window Workshop Ltd, Mr King worked as a commission-only salesman for 13 years and did not receive holiday or sick pay.  His contract was terminated once he had reached 65 and subsequently Mr King bought a claim for unpaid holiday leave. The argument from Mr King was that he failed to take his full annual holiday entitlement on the basis that it was unpaid and he would, as a result, be out of pocket.

Ordinarily, where a worker fails to take their full annual holiday entitlement they will lose said holiday and they will not be entitled to payment in lieu either. The only exception to this rule being where a worker has left their employer and they have untaken holiday leave remaining. In such an instance, they would be entitled to payment in lieu. However, there are instances where a worker can carry untaken holiday leave over to the next year. NHS Leeds v Lerner affirmed an earlier ECJ ruling and provided that leave can be taken in instalments and must be taken within said leave year, save where the worker was unable or unwilling to take it because he was on sick leave and as a consequence did not exercise his right to annual leave.  Should this scenario arise, then they would be entitled to take their holiday leave at the earliest opportunity.

The Advocate General was called upon by the ECJ to advise on this matter. He said that, in his opinion, all employers must provide adequate facilities to allow workers to exercise their right to take paid annual leave. Further to this, it would be inconsistent with the purpose of Article 7 (Working Time Directive) to require workers to take unpaid leave before they are able to make a claim for unpaid holiday pay. In addition, where Mr King was not paid for holiday leave, he was, to all extents and purposes, prevented from exercising his right to leave. Therefore, where the employer refuses to pay for holiday leave, the worker can claim that they were prevented from taking that leave and the right to annual leave carries over until they are able to exercise it.

The decision by the Advocate General was non-binding, but he recommended to the ECJ that, where a worker is refused holiday pay, they are entitled to make a claim for payment in lieu of holidays for the whole period of employment. In Mr King’s case, he was offered an employment contract after 9 years of service, which would have entitled him to paid holidays, although he rejected the offer. Therefore, it is a question for the Tribunals to decide whether this would restrict his right to claim for holiday payments from that date, taking into account any disincentives to accept the employment contract. In addition, any attempt to remedy this, for example by offering paid holiday from today, would not remove the liability for any past breaches, except for where the worker is afforded the opportunity to take any untaken holiday leave, in addition to their current entitlement, before the termination of their contract.

Whilst the Advocate General’s advice is non-binding, the ECJ normally follows the advice provided. Should the advice be followed, then the ruling becomes binding. It is important to stay ahead of the game, as a recent study has shown, an estimated £1.5billion is denied to workers in unpaid holiday pay each year. Best practice would be to undertake a review of all of your workers to ensure that they are given at least the minimum entitlement to paid holiday, being at least four weeks’. Where any workers have been denied this right, employers should ensure that they try to remedy this, as any potential claim could be costly.

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