The Court of Justice of the European Union (“EU Court”) on 29 November 2017 adopted a decision in a case from the UK, which states that workers shall be entitled to accumulate paid annual leave when the employer does not put them in a position in which they are able to exercise their right to holiday pay.
In this case Mr. Conley King worked for a sash window firm on a self-employed basis, therefore, he did not receive holiday pay; when he took the annual leave, it was unpaid. Upon termination of his employment relationship with the company, he claimed to recover payment for his annual leave for the entire period of his engagement. The court in the UK held that despite of the written terms of the contract in fact Mr. King was a ‘worker’ within the scope of UK legislation implementing the Working Time Directive (2003/88/EC) and, therefore, entitled to paid annual leave. The court posed the question to the EU Court whether EU law allows to claim retroactive payment for the entire length of employment.
In the judgement the EU Court noted that the right of the workers to have paid annual leave shall be regarded as an important principle of EU social law laid down in the Charter of Fundamental Rights of EU. The EU Court also explained that the purpose of this right is to enable workers to have rest and to enjoy a period of relaxation. If the remuneration for the leave is uncertain, the worker is not able to fully benefit from the leave and it might also dissuade the worker from taking holiday. Therefore, the EU Court held that those national provisions or practices that prevent workers from carrying over and accumulating (until termination of employment) the paid annual leave right which could not be exercised during the employment relationship due to reasons attributable to the employer, are not compatible with EU law.
According to several professional follow-up articles, this judgment might have significant impact on companies that use staff on self-employed basis. Those companies that pretend workers as self-employed by using sham contracts, might potentially face liabilities if their status is later challenged, for instance companies might be held liable for holiday pay when the worker’s employment is terminated.