The EAT has determined that Mr Smith's case was distinguishable from the European Court of Justice case of King v Sash Window Workshop Ltd ('King'). In that case, it was found that workers have the right to payment for untaken holiday which they did not take previously due to uncertainties as to whether they would be paid, and that they can carry-over that payment right from year to year. The result is that, whilst a worker is entitled to carry-over without limit any annual leave untaken because the employer refuses to remunerate it, the King principle does not extend to annual leave that was in fact taken but was not paid.
The EAT also found that Mr Smith's claim for unpaid holiday was out of time.
Smith v Pimlico Plumbers Ltd
The individual in this case, Mr Smith, was previously found to be a worker in the Supreme Court decision on his employment status in 2018, which we reported here. As a worker legally entitled to various employment rights including paid holiday and national minimum wage, Mr Smith was able to continue to pursue his holiday pay claim against Pimlico Plumbers Ltd ('Pimlico') who had previously engaged him as a plumbing and heating engineer.
Mr Smith claimed that, although Pimlico had allowed him to take annual leave and he had routinely done so, he had never been paid for it. He therefore sought payment for the unpaid annual leave he had already taken. Notwithstanding Mr Smith's worker status as determined by the Supreme Court, the Employment Tribunal (ET) dismissed Mr Smith's claim for holiday pay on the basis that the claim was brought out of time.
Our report on the ET's decision is available here. In summary, Mr Smith brought his claim in August 2011. He claimed that the last occasion on which he had not been paid for holiday was February 2011 (five months earlier). The ET therefore considered that Mr Smith's claim for arrears of pay was out of time on the basis that such claims should usually be brought within three months of the last deduction (subject to any ACAS extension).
Mr Smith appealed to the EAT.
Why Was The Holiday Pay Claim Dismissed?
The EAT upheld the ET's decision that Mr Smith's claim was brought out of time.
It went on to find that even if Mr Smith's claim was in time his claim could not encompass earlier periods of holiday due to gaps of three months or more between the unpaid sums. Legally, this meant that they could not qualify as a "series of deductions" under section 23(3) of the Employment Rights Act 1996. In reaching this decision, the EAT relied on the principle set down by the EAT in Bear Scotland Ltd v Fulton (No.1) and dismissed the contrary conclusion by the Northern Ireland Court of Appeal in Chief Constable of Northern Ireland v Agnew (Northern Ireland) which suggested that a series of deductions would not be broken by a gap of three months or more. The EAT pointed out that it generally follows its own previous decisions, rather than those of a court whose decisions it is not bound by.
The EAT also considered the King principle, which was previously reported here, and found that it did not apply where holiday is taken but unpaid. In the EAT's view, if the European Court of Justice had intended to develop a carry-over right in this context, it would have said so on these terms.
What Could This Mean For You?
The EAT's decision gives comfort to employers who faced potential claims for carry over holiday pay for workers' annual leave which was taken but not paid for. The ruling still means however that workers are entitled to carry over holiday pay into subsequent leave years when they do not take their holiday entitlement because their employer has told them that they will not be paid for it. In these instances employers should be aware that, on termination, the worker will be able to claim for a payment in lieu of all the accrued but untaken leave.
The EAT's decision also shows how there is now conflicting case law about whether a gap of more than three months between periods of holiday breaks a series of deductions. The UK Supreme Court is due to hear an appeal in the Northern Ireland case in June 2021 and this should resolve the issue.