Bogus self-employment – right to paid leave without any time limit?

According to the Advocate General’s opinion to the European Court of Justice (dated 8 June 2017, C-214/16, C. King v The Sash Window Workshop Ltd and Richard Dollar) the right to paid holiday carries over until the worker has an opportunity to exercise his right to paid leave. On termination of the employment relationship, the worker can claim an allowance in lieu of paid annual leave that has not been taken up until the date on which the employer made available to the worker an adequate facility for the exercise of the right to paid annual leave.

Mr King worked for the defendant as a self-employed salesman for 13 years between 1999 and 2012. He was paid only by way of commission. The contract was silent on the question of paid annual leave and Mr King assumed that as a self-employed person he had no right to paid holiday. After his dismissal in 2012 he instituted proceedings in the UK Employment Tribunal which decided among other things that Mr King was a “worker” and that he was entitled to paid holidays for the whole 13 year period. Part of the claim for paid holiday was for holiday to which Mr King was entitled but did not in fact take.

The Advocate General held that the employer has to implement the facility for the exercise of the right to paid holiday. If the employee does not have the opportunity to exercise the right it does not expire unless the employer implements such facility. Consequently, if an adequate facility for the exercise of the right was never provided, then an allowance in lieu is to cover the full period of employment until termination of the employment relationship.

The EU jurisdiction concerning the limitation and expiry of the right, e.g. in the case of long term sickness (Schultz-Hoff, C-350/06), is not relevant as it assumed that the right already existed. Therefore, it concerned the conditions for the entitlement to and granting of paid annual leave. The opportunity to exercise the right, however, is a pre-condition for that.

If the European Court of Justice (ECJ) follows the Advocate General’s opinion, customers or employers take the serious economic risk for being sued for holiday entitlements or allowance in lieu on termination. In the case of bogus self-employment the claim will always refer to the whole length of the contractual relationship as holiday entitlement is never a part of such contract. This will also have an impact on the amount of back payment of social security contributions as paid holiday entitlement is part of the remuneration of an employee. The distinction between employment and self-employed activities is once again in focus.