The issue of whether or not a person is an ‘employee’, a ‘worker’ or self-employed – the issues at the heart of the Autoclenz and Uber cases – has come up again in King v The Sash Window Workshop Ltd.

Mr King worked as a self-employed, commission-only salesman for The Sash Window Workshop Ltd (SWW) from June 1999 until 2012. Despite being offered an employment contract by SWW in 2008, which would have given him the right to paid annual leave, he chose to remain self-employed under a contract which made no provision for paid holiday and took varying amounts of unpaid holiday each year. Throughout his engagement, Mr King was never provided with any opportunity to take paid annual leave, nor did he request it.

In October 2012, SWW terminated Mr King’s contract. Mr King then claimed that he should have been treated as a worker, not as self-employed, and sought compensation for pay in lieu of accrued but untaken annual leave for his entire engagement with SWW. He alleged that he had not taken his full leave entitlement each year because it would have been unpaid. The Employment Tribunal held that both parties had genuinely mistaken Mr King’s status and agreed that he had been a worker, not a self-employed consultant and was therefore entitled to payment in lieu of accrued but untaken holiday for the whole of his 13-year engagement. However, the Employment Appeal Tribunal reversed the Employment Tribunal and upheld SWW’s appeal. He appealed; and Court of Appeal decided to seek guidance from the European Court of Justice on whether Mr King should be paid in lieu for all his untaken annual leave even though he had never requested to take it.

The questions referred by the Court of Appeal were as follows:

‘(1) If there is a dispute between a worker and employer as to whether the worker is entitled to annual leave with pay pursuant to article 7 of Directive 2003/88 (1), is it compatible with EU law, and in particular the principle of effective remedy, if the worker has to take leave first before being able to establish whether he is entitled to be paid?

(2) If the worker does not take all or some of the annual leave to which he is entitled in the leave year when any right should be exercised, in circumstances where he would have done so but for the fact that the employer refuses to pay him for any period of leave he takes, can the worker claim that he is prevented from exercising his right to paid leave such that the right carries over until he has the opportunity to exercise it?

(3) If the right carries over, does it do so indefinitely or is there a limited period for exercising the carried-over right by analogy with the limitations imposed where the worker is unable to exercise the right to leave in the relevant leave year because of sickness?

(4) If there is no statutory or contractual provision specifying a carry-over period, is the court obliged to impose a limit to the carry-over period in order to ensure that the application of the Regulations does not distort the purpose behind article 7?

(5) If so, is a period of 18 months following the end of the holiday year in which the leave accrued compatible with the article 7 right?’

Advocate General Tanchev issued his Opinion in the case of C King v The Sash Window Workshop Ltd & Richard Dollar in June, proposing that the ECJ answer the questions referred by the Court of Appeal as follows:

‘(1) If there is a dispute between a worker and employer as to whether the worker is entitled to annual leave with pay pursuant to Article 7 of Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time, it is incompatible with EU law, and in particular the principle of an effective remedy, if the worker has to take leave first before being able to establish whether he is entitled to be paid.

(2) If a worker does not take all or some of the annual leave to which he is entitled in the leave year when any right should be exercised, in circumstances where he would have done so but for the fact that the employer refuses to pay him for any period of leave he takes, the worker can claim that he is prevented from exercising his right to paid leave such that the right carries over until he has had such opportunity to exercise it.

(3) Upon termination of the employment relationship, pursuant to Article 7(2) of Directive 2003/88, a worker is entitled to an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave. It is only at this point that temporal and other restrictions on exercise of the right to paid annual leave that Member States may have elected to impose can commence to apply, and even then only if such restrictions fall within the boundaries of the discretion afforded to Member States under Article 7(1) of Directive 2003/88, and are otherwise in conformity with EU law. If an adequate facility for exercise of the right to paid annual leave was never provided, then an allowance is due under Article 7(2) of Directive 2003/88 to cover the full period of employment until termination of the employment relationship. In the circumstances of the main proceedings, a limit to the carry over period of 18 months following the end of the holiday year in which the leave accrued is not compatible with Article 7 of Directive 2003/88.’

The Advocate General’s Opinion is not binding on the ECJ. However, it is clear from recent cases such as Autoclenz and Uber (which is currently awaiting an appeal) that there are potentially large numbers of individuals working in the gig economy in particular who have been treated by companies as self-employed when in fact they may be workers or employees. If the ECJ agrees with the Advocate General’s opinion, there could be significant financial and administrative consequences for such companies under EU law.

As to Mr King’s case, however, once the ECJ has ruled, the Court of Appeal will decide whether his claim should succeed on its facts. It should also be noted that this claim only deals with the situation where workers have not taken annual leave because they have been led to believe it will not be paid. Workers who have taken leave but not been paid for it must bring a deduction from wages claim, within three months of the deduction or the last in a series of deductions.

We are grateful to Frank Cranmer for preparing this case note