Workplace Report April 2022

Employment law - Case reports

Workers can claim back pay for holiday taken but not paid

Workers can recover payment for annual leave taken, but not paid, dating back to the start of their employment.

Case 2: the facts

Heating engineer Gary Smith worked for Pimlico Plumbers from August 2005 to May 2011. Throughout that time, he was denied paid holiday because the company claimed that he was self-employed. Employers are only legally obliged under the Working Time Regulations 1998 (WTR) to pay holiday pay to “workers” and “employees”, not those who are genuinely self-employed.

Whenever Smith took holiday, he had to take it as unpaid leave.

In August 2011, Smith brought a claim in the employment tribunal for, among other things, holiday pay, as a breach of reg 16 WTR and an unlawful deduction of wages under section 13 Employment Rights Act 1996 (ERA). As a preliminary issue, the tribunal found that Smith was in fact a “worker” and entitled to rights under the WTR and ERA – a decision that was eventually confirmed by the Supreme Court (Pimlico Plumbers Ltd and anor v Smith [2018] UKSC 29).

But when Smith’s case then returned to the tribunal in March 2019 to be decided, the tribunal dismissed it because it was out of time. The time limit for bringing a claim for outstanding holiday pay is three months from the last deduction, or series of deductions (up to a maximum of two years) in the case of the unlawful deduction claim.

The ruling

The key issue was whether a principle established in the case of King v Sash Window Workshop [2018] IRLR 142 applied in Smith’s case. This is that when a worker has been prevented from exercising their right to paid annual leave, the right carries forward into subsequent years and they can claim it all as a debt when that employment ends. The tribunal said that King only applied to workers who had been prevented from taking any leave at all and not to those who had taken leave but not been paid for it. Smith appealed unsuccessfully to the EAT but the Court of Appeal overturned the tribunal’s decision.

The Court of Appeal said that because the EU Working Time Directive establishes that workers are entitled to “paid annual leave”, a worker who takes unpaid leave in circumstances where their employer refuses to pay for it is not exercising their right to paid annual leave. The King principles still apply, and the worker can claim payment equivalent to the untaken or unpaid holiday when the employment ends.

Smith v Pimlico Plumbers Ltd [2022] EWCA Civ 70