Self Employed Holiday Pay For Newly Classed Workers

Caragh Bailey
08/03/2022
1
6 min read
A cluttered desk with an alarm clock on it reads 'Paid time off'. Self Employed Holiday Pay for Newly Classified Workers. A case study from Employment Law Friend

High Court Judgement:
Trinity Term [2018] UKSC 29 On appeal from: [2017] EWCA Civ 51
Case Name:
Pimlico Plumbers Ltd and another (Appellants) v Smith (Respondent)
Relates to:
Unlawful Deduction of Wages
Decision:
Succeeds at court of appeal: (Click to read details)
Award:
£TBC

The self employed are not entitled to holiday pay. However, The Supreme Court settled in 2018 the long running dispute that many of those engaged by Pimlico Plumbers are workers and not self-employed, as the employer had long claimed.

This is one of many important judgments which sought to further clarify the often murky distinction between those who are self-employed and those who are workers, a growing area of dispute in the “gig” economy.

Last week there was a further Court of Appeal case which arose out of the first one and here, Gary Smith, who brought the original claim that established him and many of his colleagues were workers, sought to claim backdated unpaid holiday pay.

This is one of many benefits which workers, like employees, are entitled to, but those who are self-employed are not (although of course, they can take breaks and go away, these will not be paid).

Mr Smith sought to be paid four weeks holiday pay (as required under the relevant previous European directive) for the years where he had previously worked for Pimlico Plumbers, and argued that having not been paid for these he was entitled to “carry over” the leave until the next year, and so on until he left.

Previous case law had established that someone could bring such claims where they had not in fact taken any leave at all, but Mr Smith had taken leave, he had simply not been paid for it because his employers wrongly classed him as self-employed.

Mr Smith lost his claim at the employment tribunal, and also the Employment Appeal Tribunal, but was successful before the Court of Appeal.

Lady Justice Simler reasoned that the Working Time Directive protected the right to “paid annual leave”, and therefore: 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...[T]o lose it, the worker must actually have had the opportunity to exercise the right conferred by the [Working Time Directive].

A worker can only lose the right to take leave at the end of the leave year (in a case where the right is disputed and the employer refuses to remunerate it) when the employer can meet the burden of showing 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.

If the employer cannot meet that burden, the right does not lapse but carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of the untaken leave."

Full time UK workers are entitled to 5.6 weeks annual leave, of which four weeks are derived from the European Working Time Directive. In effect this judgment means that the four weeks that come from the Directive, will, if not paid, be carried over to the next year by operation of law.

This will continue irrespective of how much leave accumulates and how many years pass by. At the end of the working relationship, that leave – having not been taken as paid leave as required under the European Directive– will be “translated” into an equivalent sum of wages.

This is a very useful and important judgment that will assist many employees and workers in claiming often significant sums of compensation.

Many people working in the so-called gig economy are wrongly classed and treated by their employers as self-employed, and are consequently not paid for annual leave.

This backdated 'self-employed holiday pay' being due is down to the fact that they are workers and is usually a part and parcel of any claim brought for worker's rights, including holiday pay. This judgment establishes that they can claim the full amount back, potentially over many years.

Four weeks pay, multiplied by several years of work, will often amount to a significant sum of compensation, and changes the “maths” on whether it is worthwhile to put time, effort and money into bringing a claim.

It is likely to vastly increase the numbers of people looking to make such claims, and for employers with a large number of individuals wrongly classed as self-employed, this could lead to very considerable pay outs.

This case is also interesting because of the high burden placed on the employer to prove that they did allow and encourage their worker's to take their holiday entitlement, as well as notify them that it would not be carried over, otherwise having to pay back years of back pay for unpaid holiday leave. This will also assist workers and their representatives in bringing claims and often settling them on favourable terms.

There is no word yet on whether this is likely to be going to the Supreme Court again. An employment tribunal will now have to determine exactly how much money Mr Smith should receive for his 6 years of work for Pimlico Plumbers.

Are you really a worker, with self employed holiday pay?
Some 'self-employed' contractors are actually workers, under employment law, with worker's rights, including holiday pay. Get in contact with us and see how we can help.

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Frequently Asked Questions
Self employed people are not entitled to holiday pay under UK employment law. This, however, can be more complicated, as some contractors who are classed by their employer as self employed, actually qualify for worker status.

If you're not sure whether you may qualify as a worker, check out our easy comparison guide.
No, unless you are wrongly classes as self-employed. To see if you qualify as a worker (and are entitled to worker's rights, including holiday pay), check out our easy comparison guide.
Self employed people are responsible for booking their own holidays. If you have undertaken work when you need to go on holiday, you will likely be responsible for hiring a subcontractor to carry out your work, check your contract.

You will not be paid for any holiday taken - Make sure to save enough of your earnings throughout the year to cover your expenses while you are not earning.
Holiday pay is protected by the Working Time Directive. Paying it is a legal requirement, provided that you qualify as a worker or an employee.

You can usually check your employment status in your contract. If you are self employed, you are not entitled to holiday pay. If you think you might be wrongly classes as self employed, check out our easy comparison guide.
This content is provided free of charge for information purposes only. It does not constitute legal advice and should not be relied on as such. No responsibility for the accuracy and/or correctness of the information and commentary set out in the article, or for any consequences of relying on it, is assumed or accepted by any member of our company. For employment law advice please get in contact and speak to your employment law solicitors.
 
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