Plumber allowed to claim back historic unpaid holiday pay, court rules

Court of Appeal finds workers can only lose their annual paid leave entitlement if their employer has encouraged them to use it

A worker who took unpaid leave because his employer did not believe he was entitled to holiday pay has been allowed to make a claim for his statutory holiday pay entitlement for the duration of his engagement with the firm, a court has ruled.

Overturning a previous judgment from the Employment Appeal Tribunal (EAT), brought by Gary Smith against Pimlico Plumbers, the Court of Appeal found that workers can only lose the right to roll over paid leave if their employer has been transparent about their allowance and encouraged them to take leave.

In a ruling that experts have said could be worrying for gig economy employers, Lady Justice Simler said any employer needed to “meet the burden of showing [that] it specifically and transparently gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave and informed the worker that the right would be lost at the end of the leave year.

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“If the employer cannot meet that burden, the right [to paid leave] does not lapse [at the end of the year] but carries over and accumulates until termination of the contract,” she said.

The Court of Appeal also found that the worker involved had the right to claim for compensation for leave that he had taken unpaid – overturning the EAT’s ruling that he could only claim for paid leave that was untaken.

“If a worker takes unpaid leave when the employer disputes the right and refuses to pay for the leave, the worker is not exercising the right [to paid leave],” Simler said.

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Barry Ross, director and partner at Crossland Employment Solicitors, said the implications of the court’s decision went “far beyond the 24 weeks of holiday pay” that Smith is now able to claim. “This decision is likely to have the gig economy extremely worried,” he said.

While workers were already able to indefinitely carry over of the untaken part of their four weeks’ paid leave entitlement – as stipulated under the European Working Time Directive – Ross explained this decision meant workers can now also carry over leave that is taken but unpaid. “On termination, the employer will become responsible for payment of the whole amount,” he said.

Ross added: “The decision also removes the two-year limit for recovery of unlawful deduction from wages where an individual is denied a right to paid annual leave, provided that the claim is brought within three months of termination.

“This means that employers no longer have the backstop of believing that their exposure could be limited to just two years,” said Ross.

Smith started working for Pimlico Plumbers in August 2005 with a contract that referred to him as an ‘employee’. However, Pimlico Plumbers maintained that Smith was a self-employed contractor and was therefore not entitled to holiday pay. Regardless of this, Smith decided to take periods of leave unpaid throughout his time with the firm.

Smith initially took Pimlico Plumbers to tribunal following his suspension in May 2011. He argued he was at least a worker, which would have entitled him to paid holiday, and sought to claim back compensation for his periods of unpaid leave.

The case went all the way to the Supreme Court, which ruled that Smith was a worker and therefore entitled to paid annual leave. However, when the case then went back to the employment tribunal, it ruled that Smith’s claims for unpaid leave were out of time.

This was upheld by the Employment Appeal Tribunal, which also said that Smith could not claim for leave that was taken but unpaid – only for unpaid leave not taken.

However, the Court of Appeal found that not only was Smith “denied the opportunity to exercise the right to paid annual leave”, meaning his claim was in time, but that he was also entitled to claim compensation for unpaid leave that he had taken.

Pimlico Plumbers has been contacted for comment.