James Medhurst: When to panic and when to relax about holiday pay


The November decision of the European Court of Justice (ECJ) in King v Sash Windows Workshop and Dollar provoked the usual media panic about employees making historical holiday pay claims, dating back for several years. But the decision was unusual in that it considered a claim made using regulation 30 of the Working Time Regulations, a path typically only taken by employees who are refused the right to take holiday, or choose not to take it knowing that it is likely to go unpaid.

The most common source of such claims is the gig economy, in cases where self-employment is found to be a sham. The government is separately consulting about making private sector clients liable for taxing intermediaries under IR35 so, while the November 2017 Deliveroo case shows that self-employment is still possible, these developments give more reason than ever to be careful. Without a detailed analysis of an organisation’s business model, pushing the boundaries of self-employment could prove very expensive.

But for other employers, there is far less reason for alarm. There is no connection between Sash Windows and the earlier decisions about overtime and commission being included in holiday pay calculations. Such cases must be litigated as unauthorised deductions from wages, if back pay is claimed, and back pay is restricted by legislation introduced in 2014 to just two years. As yet, there is no reason to believe that this legislation will cease to apply.

Many employers have corrected their holiday pay calculations to take all of the case law into account and, as long as this was done more than three months ago, most claims for historical underpayments will be out of time. For those still to update their payroll practices, now is the time to do so, while keeping calm in the meantime.

James Medhurst is associate at law firm Fieldfisher