No right to carry over payment where annual leave has been taken unpaid

The Employment Appeal Tribunal (“EAT”) has ruled in Smith v Pimlico Plumbers Ltd that a worker cannot carry over a right to payment for annual leave when they have been permitted to take annual leave but have not been paid for it.

The principle

In Pimlico Plumbers, the EAT looked to the earlier decision of the European Court of Justice in King v Sash Window Workshop Ltd, in which it was confirmed that an employee could indefinitely carry over holiday that they had not taken because they would not be paid for it.  In the current case, the EAT considered whether the same principle applied where the leave was taken, but not paid.

The facts

Mr Smith worked for Pimlico Plumbers between August 2005 and May 2011.  Under his contract, he was ‘self-employed’ but a series of earlier appeals up to the Supreme Court established his status as a worker, and therefore he was entitled to paid annual leave.

In August 2011 he presented numerous claims, one of which was for unpaid holiday pay throughout the duration of his time with Pimlico Plumbers.  Mr Smith argued that whilst he was entitled to (and did) take annual leave, he was not paid for it, which meant he had periods of unpaid leave that he had taken.  Upon termination of his employment, Mr Smith argued that he should be allowed to carry over a right to payment for all of the unpaid leave that he had taken.

Mr Smith’s arguments were rejected: the EAT ruled that there was no right, in situations where the employee had taken unpaid leave, for them to carry over the right to a payment for that leave on termination.

Impact of the Case

Had Mr Smith not taken his annual leave, the EAT would most likely have followed the King decision and ruled differently.  However, this case establishes that employees can only carry over claims for unpaid annual leave if the leave has not been taken.

Employment status remains a very live issue, particularly in light of the recent Uber decision from the Supreme Court (which we reported on here).  However, this decision gives some comfort to organisations that operate with a large number of “self-employed” individuals.  Insofar as they are subsequently found to be workers, any right they have to historical holiday pay will be limited to leave that they have not taken at all.