Working Time Regulations
Claims for holiday pay come under Working Time Regulations (WTR) and/or under the unlawful deduction of wages provisions within the Employment Rights Act 1996 (ERA).
Regulation 30 of the (WTR) requires that a claim must be brought within 3 months of the date when the alleged right would have been permitted or when the relevant payment should have been made.
A claim for unlawful deductions under the ERA must be made within 3 months of the unlawful deduction or from the last deduction in a “series” of deductions.
Annual Leave
Any employee/worker working 5 or more days is entitled to 5.6 weeks paid annual leave consisting of 4 weeks leave under the EU Working Time Directive and an additional 1.6 weeks.
In relation to the 4 weeks leave, the (WTR) require these holidays to be taken within the holiday year to which it relates but there are exceptions to this rule like. For example, long term sickness where carry over is for up to 18 months based upon current case law, employee on leave due to statutory leave rights like maternity leave or where the Employer has not actively encouraged staff to take the holidays.
The remaining 1.6 weeks entitlement under the (WTR) do not come from EU law and can be carried forward if permitted under a relevant agreement between the parties or otherwise are lost.
In 2018 there was a Supreme Court case called Smith v Pimlico Plumbers (PP), where Mr Smith had worked as a plumbing and heating engineer for (PP) over several years and taken unpaid leave from time to time as (PP) regarded Mr Smith to be self-employed. However, the Supreme Court decided on the facts that Mr Smith was a worker thus had a potential claim for back-dated statutory holidays.
Mr Smith made an unlawful deduction claim for back dated statutory holidays and The Employment Tribunal and then the Employment Appeal Tribunal held that the unlawful deduction claim was out of time as was outside the 3-month period to make a claim from the end of the last holiday year to which the claim related to.
The Court of Appeal (1) took a different view and decided that backdated holiday pay under the EU Working Time Directive relating to the 4 weeks’ annual leave would apply for every year Mr Smith worked for (PP) which was for 5 years or so. This entitlement applied even if Mr Smith took unpaid leave over that time and that the claim under the (WTR)s was in time because it was brought within 3 months of termination of employment.
On the matter that a 3-month gap in a series of deductions would break the series and prevent a claim, the Court of Appeal have cast doubt on whether this can be relied upon as it will be a question of fact and degree on the evidence, whether the deductions are sufficiently similar or related over time to constitute a “series”.
To prevent 4 weeks carry over, the Employer would need to show that they gave the worker every opportunity to take paid annual leave, encouraged them to take leave and explained the consequences of not doing so namely the right would be lost at the end of the leave year if not taken. Failure to do so results in the leave accumulating until termination with payment of accrued holidays and if not paid, the worker would have 3 months from termination to bring a claim.
Please note that The Deduction from Wages (Limitation) Regulations 2014 provides for a two-year period to bring claims. However, the Court of Appeal did not address this matter as Mr Smith’s claim was brought before the Regulations came into effect on 1st July 2015 hence unclear on how a future Court will deal the Regulations in the context of the Court of Appeal decision.
Also, the Court of Appeal decision may have an impact on those off on long term sick as case law suggests that the 4 weeks carry over only extends to 18 months from the end of the leave year in which that holiday was due.
It is likely that the Court of Appeal decision will be appealed but until then the decision stands and has a major impact for Employers on backdated statutory holiday claims thus it is prudent for Employers to take professional HR advice and guidance.
Please note that this article is for information purposes only current to 18th February 2022 and should not be relied upon as being authoritative on the matter however further guidance on the matter can be provided by contacting our HR/legal advice-line on 01455 852028.
