UK: EAT rules that usual time limits apply to pay claims for taken holiday, even if employer refused to provide paid leave

The Employment Appeal Tribunal (EAT) has ruled that, where a worker has taken statutory holiday but not been paid, holiday pay claims must be brought within the usual time limits, even where the employer expressly refused to provide paid holiday (on the mistaken basis that the individual did not have worker status).  This contrasts with the position where workers have not actually taken their leave, where rights can be carried over indefinitely (and paid in lieu on termination) if the employer refused to pay for leave.

The UK Working Time Regulations (WTR) expressly do not permit carryover of the 4 weeks’ EU-derived statutory holiday.  Case law has established that, to comply with EU law, the UK regulations should be purposively construed to permit carryover where a worker has been prevented from taking his entitlement due to sickness absence or family-related leave (but it must be taken within 18 months after the relevant leave year end).  In King v Sash Windows, the European Court of Justice (ECJ) held that workers should also be allowed to carry over untaken statutory holiday indefinitely where the employer refused to pay for it.

The claimant in Smith v Pimlico Plumbers sought to argue that Sash Windows extended to cases where a worker does actually take holiday despite the employer's refusal to remunerate it.  The EAT accepted that the lack of pay might well deprive a worker from fully benefiting from the rest and relaxation of holiday, but considered that the ECJ's judgment could not be read as extending to situations where leave had been taken, given this would render ineffective the time limits on claims to pay for this leave in the WTR (which the ECJ had not criticised).

The claims here had been brought out of time and the EAT ruled that the claimant did not have grounds for the usual three month time limit to be extended (on the basis that it was not reasonably practicable to bring the claim in time).  Ignorance of his worker status was not sufficient to establish this, notwithstanding the employer's efforts to conceal the true status through its documentation, as he was an intelligent man carrying out a well-remunerated professional service and so it was reasonably feasible for him to make inquiries about his rights within the time limit.  The position might be different for other claimants, where a lack of financial resource to seek advice or greater deception on the part of the employer render it not reasonably practicable to bring the claim in time.

Of course, particularly for atypical workers, there may often be factual disputes as to whether time not working was taken as holiday or not. This will be relevant both to whether a Sash Windows type claim is feasible and, where it is not, to whether there are pay claims in time.

We understand leave to appeal has been granted. The EAT expressly stated that it did not find the task of interpreting the ECJ's decision in King to be an easy one.  Argument is likely to focus on whether the EAT was right to view a worker who has taken unpaid leave as having at least partially exercised their right and therefore in a different situation (for which a different remedy is acceptable) from the worker who has not taken leave at all in light of the employer's refusal to pay, and in particular whether this is compatible with the ECJ's view that the right to annual leave and to payment during that leave are “two aspects of a single right”.

Update February 2022: the EAT judgment has now been overruled by the Court of Appeal - see our blog post here.