Employment Law E-Bulletin Issue 54

• King v The Sash Window Workshop Ltd and anor C-214/16 – Right to paid holiday carries over until worker has the opportunity to exercise it
• Charlesworth v Dransfields Engineering Services Ltd UKEAT/0197/16 – Redundancy following sickness absence was not disability discrimination
• Matthew Taylor Report

King v The Sash Window Workshop Ltd. and anor C – 214/16 – Right to paid holiday carries over until worker has the opportunity to exercise it

The Advocate General of the European Court of Justice (“CJEU”) has stated that the paid holiday entitlement of a ‘worker’ may be carried over to subsequent years if the worker has been discouraged from taking holiday because this would have been unpaid. This allowance is in respect of the whole of a worker’s period of employment or engagement up until the date on which an ‘adequate facility’ has been put in place allowing them to exercise their right to take the paid annual leave.

The Claimant had worked for SWW Limited (the “Company”) since June 1999 as a self-employed salesman, generating a commission only salary. In 2009, he was offered an employment contract which incorporated a right to take annual leave. However, he decided to remain self-employed, under a contract which did not have provision for annual leave. The Claimant took varying amounts of holiday each year during his engagement with the Company but was not paid in respect of any of this.

The Claimant successfully claimed that he was a ‘worker’ under the Working Time Regulations (“WTR”) 1998 and the Tribunal awarded him holiday pay in respect of leave accrued but untaken up to the date of termination in the current leave year, leave requested and taken in previous years claimed as a series of unlawful deduction from wages, and leave accrued but untaken in previous years.

The Company appealed to the Employment Appeal Tribunal (“EAT”) against the decision to allow the carryover of untaken leave from one year to the next and was successful.

The Claimant appealed to the Court of Appeal in February 2016, which referred a number of questions to the CJEU, including: (1) whether, where a worker does not take some of their annual leave entitlement because their employer refuses to pay them during annual leave, they can claim that they were prevented from exercising their right to paid leave so that the right to leave carried over until they had the opportunity to exercise it; and (2) whether, if that right does carry over, does it do so indefinitely or is there a limited period during which the right must be exercised (in the same way as workers who are unable to exercise their right to take leave because of sickness).

The Advocate General agreed with the Claimant’s arguments. Where a worker does not use their entitlement to paid holiday because they know they would not be paid by their employer, the worker can claim they were prevented from exercising their right to paid leave, and the right then carries over until the worker has had the opportunity to exercise it, in this case it was the termination of the Claimant’s employment.

Points to note:

It is important to note, as mentioned above that at this stage this is just an opinion which is not yet binding. The case will need to be heard by the CJEU for a final judgement and no date has been set for this as yet. However, the CJEU often follows the Advocate General’s opinion.

A key principle which can be drawn from this decision is that, an employee who is unable or unwilling to take holiday for other reasons which are beyond their control, for example, because their employer has confirmed that they will not pay for this, may be entitled to carry-over their holiday entitlement to the following leave year. This case only deals with this situation, where a worker has not taken holiday because they have been led to believe it will not be paid. In terms of what an ‘adequate facility’ for exercising the right to paid leave would be, the Advocate General referred to a sufficiently detailed contractual term covering this right.

There doesn’t seem to necessarily be a requirement for a request for leave to actually be made by a worker, it looks to be enough that they could be discouraged due to the wording of their contract or holiday policy. It is therefore imperative that employers (1) review their workforce to check whether there are any workers who are not receiving paid annual leave when they should be; and (2) check that the annual leave provisions in their contractual terms with employees and workers are sufficiently clear to avoid any confusion as to payment, which could discourage workers in any way.

If workers have already taken leave but have not been paid for it, then the usual limitation rules would continue to apply to any deductions from wages claim for the unpaid holiday pay. It is important to remember that under the Deduction from Wages (Limitation) Regulations 2014 there is now a 2 year backstop on claims for unpaid holiday pay.

Charlesworth v Dransfields Engineering Services Ltd UKEAT/0197/16 – Redundancy following sickness absence was not disability discrimination

This case confirmed that making an employee redundant after a period of disability related absence will not necessarily mean that the dismissal itself was because of their absence.

The Claimant was employed by Dransfields Engineering Services Limited (the “Company”) as Branch Manager. In October 2014 he was absent from work for a period of 2 months while receiving treatment for renal cancer. During the Claimant’s period of absence, it decided to redistribute his responsibilities across a number of other roles within the business in an attempt to save money.

The Company initiated a formal redundancy consultation process and notified the Claimant of its intention to make his role redundant. Whilst the Company took steps to consider alternative employment, it was unable to identify a suitable vacancy for the Claimant and, as such, his employment was terminated. The Claimant brought a claim in the Employment Tribunal (“ET”) in respect of unfair dismissal, direct disability discrimination and discrimination arising from disability.

The ET acknowledged a link between the Claimant’s absence on account of his illness and the cause of his dismissal, namely, that it enabled and prompted the Company to identify an opportunity to save around £40,000 by absorbing the content of his role into others. That being said, it was not prepared to accept that this connection amounted to a dismissal on account of the Claimant’s absence. In other words, it could not be said to have been the operative cause for his dismissal.

The Claimant appealed to the EAT which agreed with the findings of the ET. The EAT considered that the Equality Act 2010 requires disability to be an effective cause of the dismissal, not simply the sole or main cause.

Points to note:

The outcome of this case serves as a useful indicator for employers in terms of what will be deemed a causal link in situations involving a dismissal with some connection to a disabled employee. It should not, however, be relied upon by employers considering making someone redundant in a similar situation as each case will turn on its particular facts and it will therefore be wise to seek advice in such circumstances.

Matthew Taylor report published

‘Good work: the Taylor review of modern working practices’ which we have provided updates on over recent months, was published on 11 July. The purpose of the review was to consider the implications of new models of working including those used in the gig economy, on the rights and responsibilities of workers, as well as on employer freedoms and obligations, and make a number of recommendations for improving the working lives of casual and atypical workers.

The report concluded that all work within the UK economy should be “fair and decent”. The report sets out the following key policy approaches:

• that the goal of the national strategy for work should be “good work” for all;
• that platform based working, i.e. the gig economy, where workers provide their services through apps and other digital systems, has a role in modern society and should therefore be protected but not at the expense of those who work within it;
• that dependent contractors should be entitled to protections and there should be stronger incentives to treat them more fairly;
• that businesses should take “good work” seriously and be open about their practices;
• that there need to be new ways for individuals to strengthen their future work prospects and skills;
• that businesses must take a more proactive approach to workplace health in light of the correlation between the shape and content of work and the individual health and wellbeing; and
• that the government needs to promote sectoral strategies engaging employers, employees and stakeholders to ensure individuals are not permanently stuck on the national minimum wage.

Please see the more detailed article on the report by our new employment team member, Fiona Campbell, on our website, but some of its key recommendations include: keeping the distinction between employees and workers, but classing individuals who work for platform based companies, such as Uber, as ‘dependent contractors’; and and extending the right to written statement of terms to workers as well as employees.