Summary: workers who have been denied the right to take paid holiday can now claim back-pay for the duration of their engagement. In the case discussed below the Claimant, Gary Smith, was entitled to claim holiday pay for 24 weeks (that being 4 weeks holiday (each year) over the duration of his 6 years engagement). For employers who have wrongly labelled workers as self-employed contractors – the impact of this judgment is likely to be very costly.
On 1st February 2022, the Court of Appeal issued a landmark decision in the case of Gary Smith v Pimlico Plumbers.
If you think this case sounds familiar, that’s because Gary Smith has been pursuing a claim for holiday pay against Pimlico Plumbers since August 2011. Pimlico Plumbers maintained that Gary Smith was a self-employed contractor and as such he was not legally entitled to be paid when on holiday. The Employment Tribunal therefore had to determine Gary Smith’s employment status before being able to consider his holiday pay claim. This preliminary issue progressed up to the Supreme Court and in 2019 Gary Smith was found to be a ‘worker’ and not a self-employed contractor. The judgment was significant in establishing principles of worker status. Having established his status as a worker, Gary Smith continued with his quest for justice to be paid for his holiday.
Gary Smith worked for Pimlico Plumbers for some six years and throughout this time he was not given paid holiday because Pimlico Plumbers contended he was self-employed. However, having established his status as a worker, the question of his entitlement to holiday pay was then considered by the Employment Tribunal. His claim was dismissed on the basis that workers who had been wrongly treated as self-employed could only bring claims for outstanding holiday pay if they’d been deterred from taking a holiday in the first place because it was unpaid. If they’d taken unpaid holiday and wanted their employer to pay for it, they had to take action within three months from the date they should have been paid. Gary Smith’s claim was therefore dismissed.
In a significant ruling, the Court of Appeal has now overturned the previous decision and concluded that Gary Smith was entitled to recover compensation for all of the unpaid holiday he took throughout the period of his engagement, pursuant to Regulation 13 of the Working Time Regulations (WTR) (this being his entitlement to four weeks leave derived from the European Rights Directive (i.e. Euro leave) (however it does not apply to the additional 1.6 week’s UK leave). This means that Gary Smith is entitled to some 24 weeks’ back-pay in total.
This recent judgment has significant impact for the ‘gig economy’ as it allows for a claim to be pursed for back-pay of holiday for the duration of the engagement. The Court of Appeal has also confirmed that the time limit for workers to pursue such a claim will crystallise on termination.
A holiday pay claim can also be brought as a claim for unlawful deduction from wages under the Employment Rights Act. Whilst not directly in issue in this case, due to conflicting judgments, the Court of Appeal was asked to comment on whether a ‘series of deductions’ is broken by a gap of three months or more. Lady Justice Simler observed that her ‘strong provisional view’ is that it did not, making it easier for claims to be pursued in the future. This aspect of the judgment is not binding, albeit it will have persuasive effect.
Given the chequered past of these parties, it remains to be seen if Pimlico Plumbers will lodge an appeal.
Summary: implications for employers
- Provided a claim is brought within three months of the termination of engagement, any worker who has not received paid leave because they have been incorrectly treated as self-employed will potentially be able to recover compensation going back to the start of their engagement.
- This will only apply to four weeks’ holiday in each year (Euro leave) and not the additional 1.6 weeks’ holiday provided under the WTR (UK leave).
- The financial cost of holiday claims is potentially very high and therefore it is more important than ever that employers carry out an audit of anyone engaged on a self-employed basis to ascertain their worker status and whether they should be receiving holiday pay.
This is only intended to be a summary and not specific legal advice. If you are concerned with any issues raised in this article or would like further information or advice, please do contact a member of our team.
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