Remember the Smith v Pimlico Plumbers Ltd saga? Now the Court of Appeal has decided that workers can claim payment for holiday which they were historically allowed to take but not paid for.
Workers, like employees, are entitled to a minimum of 5.6 weeks’ paid holiday per year. In contrast, self-employed individuals have no statutory right to paid annual leave.
Gary Smith worked for Pimlico Plumbers Limited from August 2005 to May 2011. Pimlico maintained that Mr Smith was a self-employed independent contractor. Although he took holiday, this was unpaid.
Mr Smith was suspended in May 2011 and was asked to return his equipment and van. Mr Smith subsequently brought an Employment Tribunal claim against Pimlico in which he argued that he was at least a worker, and therefore should have been paid for his annual leave. He sought compensation for his unpaid leave.
In 2018, the Supreme Court held that Mr Smith was a worker because he undertook to “perform [his services] personally”, in accordance with the statutory definition of a worker.
In 2019, the Employment Tribunal rejected Mr Smith’s holiday pay claim. Mr Smith appealed to the Employment Appeal Tribunal, but this was dismissed in 2021.
Mr Smith then appealed to the Court of Appeal. Lady Justice Simler held that “[a] worker can only lose the right to take leave at the end of the leave year (in a case where the right is disputed and the employer refuses to remunerate it) when the employer can meet the burden of showing it specifically and transparently gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave and informed the worker that the right would be lost at the end of the leave year”.
If an employer is unable to do this, “the right … carries over and accumulates until termination of the contract, at which point the worker is entitled to a payment in respect of the untaken leave”.
This is a significant judgement which increases the risks for employers who engage self-employed contractors, who could later be deemed workers. It means that staff who were allowed to take holiday but were not paid for it because their employer did not identify them as a worker, can carry over (and ultimately claim payment for) that holiday on termination of their employment, if it unfolds that they were a worker. The case highlights the importance of getting employment status right from the beginning and exemplifies how a failure to do so could prove costly for employers.
