From Ibiza to insolvent: Why the latest ECJ ruling could spell trouble for your company

Posted on Dec 15, 2017

The latest judgement from the Court of Justice of the European Union is a game changer for employers. In a bad way. In the case of King vs The Sash Windows Workshop Limited, the decision was made that Mr King, a “self-employed” employee of 13 years, should have been classified as a “worker”, and therefore is entitled to holiday pay for cumulative holiday that he either took unpaid or did not take over the entire period of employment, amounting to some £27,000.

The can of worms this opens is a juicy one, and if I were a betting woman I would put money on the number of similar claims rising drastically in the coming months. Now, not only will employment status claims be focused around gaining more rights or being compensated for short term issues, but also being remunerated for rights they should have had over their full term of employment. This is because the ECJ ruled that if an employee does not know he is entitled to paid leave, even if the employer thinks that they aren’t, the holiday can accrue until the end of the employment relationship.

The only potentially silver lining is that, only the EU minimum holiday period of 20 days per year is covered by this judgment rather than the UK’s 28 days, and therefore the employer would “only” owe for the EU minimum.

This case has set an ominous precedent for employers, who might find themselves owing vast amounts of unpaid holiday pay – not to engage in “Uber-bashing” but using them as a currently hot example, they “employ” 40,000 or so drivers. Furthermore, the fact that the ECJ is passing a judgement on a British case of employment status could lead to further developments and challenges in the gig-economy debates. The EU definition of “worker” encompasses more than our domestic definition, and this verdict could lead to the EU definition being honoured in British tribunals. For example, it is likely that, under the EU definition, Deliveroo employees would be found to be “workers” rather than “self-employed”, despite the fact that they have been judged otherwise in our tribunals.

I imagine at this point you’re all thinking something along the lines of “yeah but we’re leaving the EU”. Wrong. Well, you are right but you’re wrong to think that this will automatically nullify the meaning and implications of this judgement. The current withdrawal bill from the EU keeps the judgements of the ECJ in UK law made before the grand exit.

Although it is possible to overturn these judgements if a relevant case makes its way to the Supreme Court and it is decided to be right to depart from the original EU precedent, for the foreseeable future our advice to employers is to plan ahead and please consider whether the risks you may currently be taking around employees’ employment status are worth it.   Either that or accept you’ll end up owing them for their last 10 summers in the Algarve.