Claiming backdated holiday pay outside the usual tribunal time rules
You may well remember a case going back and forth through the various courts relating to Pimlico Plumbers. It is a long-standing and complicated case that has dealt with employment status and rules around claiming backdated holiday pay.
The claimant (Gary Smith) was unsuccessful in the previous tribunal ruling and so he took his case to the Court of Appeal, which was heard in December and the ruling published February 2022.
The circumstances
This case centres around whether the original employment courts were correct to not uphold the claimant’s claim for backdated holiday pay. Both the original tribunal and the appeal tribunal held the view that the claimant had not filed his claim for backdated pay quickly enough. Under existing tribunal rules, a claimant must claim for any missed pay within three months for each holiday period.
The claimant was arguing that he was due backdated payments from 2005 and appealed to the court of appeal.
To put this in context, back in 2018 Gary Smith won his claim at the Supreme Court, against Pimlico Plumbers which determined his employment status as worker rather than self-employed and consequently, would be entitled to holiday pay and other employment rights.
In 2019 Mr. Smith claimed to an Employment Tribunal that he was due £74,000 in lost holiday pay, because of the original 2018 Supreme Court ruling, however he lost his claim because he had not filed his claim for the backdated holiday pay quickly enough. Based on his case, Mr. Smith should have made his claim for missed pay within three months of each holiday period dating back to 2005.
Mr. Smith appealed the Employment Tribunal decision arguing that the original court had not correctly applied the law and that mistakenly concluded that he had not been able to show it was not reasonably practicable for him to bring the claim within the three-month time limit.
He also argued that in another ruling of King v The Sash Window Workshop, somebody who was self-employed was found to have worker status and successfully argued that he was entitled to holiday pay during the 13 years that he worked for Sash Windows, and therefore entitled to a payment of untaken accrued holiday for the 13-year duration.
The court of appeal upheld his appeal.
The judgement
The court of appeal upheld the appeal which is a landmark ruling for employers. The ruling outlined that “whilst domestic legislation can provide for the loss of the right at the end of each leave year, to lose it, the worker must actually have had the opportunity to exercise the right conferred by the working time directive”.
The case also centred on how the original tribunal had applied the precedent that had been set in the case of King v Sash Window Company (this is the case that ruled accrued untaken holiday pay could be taken on termination).
The ruling deemed the claim had in fact been in time because he had been denied the opportunity to exercise the right to paid annual leave throughout his engagement with Pimlico Plumbers.
To conclude, the key findings which will have implications for all employers include that a worker can only lose their right to backdated holiday pay if the employer can specifically and transparently show that they:
- Gave the worker the opportunity to take paid annual leave
- Encouraged the worker to take paid annual leave
- Informed the worker that the right would be lost at the end of the year
Learning points
The findings in this case mean that if an employer cannot evidence that they were specific and transparent in giving a worker the opportunity to take paid leave, encouraged the taking of the leave or forewarned the worker that the entitlement would be lost at the end of the holiday year if not used, any unused holiday carries over and holiday continues to accrue until termination of the contract.
Our advice therefore would be:
- Check the employment status of those who you currently believe to be self-employed. Making sure you are satisfied that this remains the case is crucial for understanding any potential tribunal and financial risk.
- For those who are truly self-employed following your assessment, ensure that moving forward you continue to manage the relationship in line with business to business set up, and not business to employee arrangement.
- Review your annual leave policy following the latest update with the Pimlico Plumbers case; are you explicit in how you deal with unused holiday, including what happens if holiday is not taken by the end of the holiday year? Does the scope of the policy allow for it to cover workers, not just employees?
You can watch on-demand our webinar from 2021 in which we explore IR35 and the rules around how you ensure someone is truly self-employed. It has useful prompts too on what to do in managing the relationship and how to ensure you keep it as a business to business one.
Further information
For more information or to speak to a member of our team, please Contact Us
