News / Unpaid Holiday Pay – Time bomb for businesses

The Irish labour market has the been subject of extensive change in recent years due to the increased casualisation of the employment relationship. This phenomenon of casualised labour is referred to as the “Gig Economy” a modern business model that is commonly recognised and associated with digital services such as Deliveroo, Air BnB and Uber. This new business model highlights yet again, the well trodden issue of whether someone is an employee or a self employed contractor. This test of employment status has been at the forefront of many Revenue and Court rulings as the status of worker is of critical importance in respect of legal rights and the tax status of an individual.

The Working Time Directive 2003/88/EC (“the Directive”) was implemented across European member states and provided that each EU worker was entitled to paid annual leave of up to 4 weeks. This Directive obliges member states to introduce legislation providing EU workers with such entitlements.

In Ireland, the provisions of the Directive were implemented under the Organisation of Working Time Act, 1997-2017 (“the Act”). This Act implements the entitlement for workers receive up to 4 weeks paid annual leave. An employer has reasonable discretion as to when to grant any annual leave requested having regard to workplace requirements and the given year to which it relates. Only where an employee consents may the leave may be extended to within 6 months of the following year. In the event that an employee cannot due to illness take annual leave within a given year, then the annual leave entitlements may be extended by a further 15 month period following the end of that year.

Interestingly in the UK, a recent decision by the Court of Appeal in King v The Sash Window Workshop C-214/16 (“the King case”) appears to look beyond any time restrictions in terms of annual leave entitlements. In this case the worker was awarded financial compensation in excess of 12 years untaken annual leave entitlements. The worker was purportedly engaged as an independent contractor from June 1999 to October 2012 and was paid under contract by commission only basis. Any annual leave taken during the course of employment was unpaid. Upon termination of the employment relationship the claimant sought to identify as an employee and recover payment for annual leave taken and unpaid and those days untaken over the course his employment history. The claim eventually came before the Court of Appeal wherein was held that the Directive was to be interpreted so as to preclude an employer from denying a worker the right to take paid leave. The Court of Appeal further held that the right to paid leave carries over until the worker has had the opportunity to exercise it and, upon termination of employment, the worker has the right to payment in lieu of leave which remains outstanding and unpaid. Compared to Ireland, the right to take annual leave beyond an extended period of time, had nothing to do with whether the worker was sick or not.

The King case is of significant note for employers across the EU including Ireland as it creates the potential for those workers wrongly classified as self-employed contractors to claim back pay in respect of unpaid annual leave going back many years once their ‘worker’ status is established. The King case highlighted that the failure to adhere to any such obligations may have far reaching financial consequences for employers. Furthermore, it may be referenced by the Irish Courts in finding employers financially liable without restriction for accrued butuntaken leave whether in respect of an employee and/or in respect of a person by who the employer thought was self employed but was in fact an employee.

These issues tend to rear their head at the end of an existing relationship where there is a dispute over the termination arrangements and/or monies due. We at CC Solicitors are employment law specialists who offer specific tailored employment advice and HR compliance/guidance to both corporate and private clients. If you are an employer and are unsure about the status of your worker’s employment, their entitlements, or your possible exposure and how to limit this then please do not hesitate to contact us for advice. If you are an employee and are unsure about your employment status, your rights and entitlements or simply wish to discuss any aspect of your employment then please do not hesitate to contact us for advice.

The contents of this briefing note are for general purposes only and does not constitute legal advice or give rise to a lawyer/client or professional advisor/client relationship. Specialist employment law advice should be sought in specific circumstances.