The European Court of Justice has held that the right to paid annual leave under the Working Time Directive carries over indefinitely where the employer refuses to give paid annual leave.

Annual leave

The individual, in this case, worked as a commission-only salesman for 13 years. He received no salary, and was never paid for any holidays or periods of sickness absence. After nine years, he was offered an employment contract under which he would be entitled to paid annual leave, but he refused. His contract was terminated when he reached 65 and he subsequently brought employment tribunal claims for age discrimination and unpaid holiday pay. The age discrimination claim was successful and was not appealed.

In relation to holiday pay, he argued that he had not taken his full annual leave entitlement each year because it would have been unpaid. An employment tribunal held that he was a worker under the Working Time Regulations and awarded him holiday pay in respect of:

  • Leave accrued in the final leave year but untaken at the date of termination.
  • Leave requested and taken as unpaid leave in previous years, claimed as a series of unlawful deductions from wages.
  • Leave accrued but untaken in previous years.

 

The employer appealed against the decision to award payment in respect of leave accrued but untaken in previous years. The other points were no longer in dispute. The Employment Appeal Tribunal upheld the appeal on the ground that he had not been prevented by reasons beyond his control from taking annual leave.

He then appealed to the Court of Appeal. The Court of Appeal referred the following questions to the European Court of Justice:

  • Is regulation 13 of the Working Time Regulations 1998 consistent with Article 7 of the Directive, given that a worker has to take unpaid leave before they can establish whether they are entitled to be paid for that leave?
  • If a worker does not take some of their annual leave entitlement because their employer refuses to pay them for it, can the worker claim that they were prevented from exercising their right to paid leave, so that the right to leave carries over until the worker has the opportunity to exercise it?
  • If the right does carry over, does it do so indefinitely or is there a limited period during which the right must be exercised?
  • If there is no statutory or contractual provision specifying a limit on carry-over, should the court impose a limit in order to ensure that the purpose of Article 7 is not distorted?
  • If so, is a period of 18 months following the end of the holiday year in which the leave accrued compatible with Article 7?

 

Annual leave accrued indefinately

The European Court of Justice said that employers must provide adequate facilities for workers to take paid annual leave. If a worker has not taken some or all of their annual leave entitlement because their employer refuses to pay them for it, the worker is entitled to say that they have been prevented from exercising their right to paid leave. If this is the case, the leave is carried over until the worker has the opportunity to exercise that right, or until the termination of their employment. It was irrelevant whether or not the worker had put in requests for paid leave over the years.

The matter will now return to the Court of Appeal which will have to decide whether the Working Time Regulations can be interpreted consistently with the European Court of Justice’s ruling.

Case reference: King v Sash Window Workshop Limited and another