Paying in lieu of Holiday pay

Previous case law established that employees who were unable to take their full annual leave entitlement due to sickness are entitled to carry over any unused holiday into the next holiday year (and, if they leave with that holiday still having been accrued but untaken, are entitled to payment in lieu of their untaken leave upon the termination of their employment).

Previous case law established that employees who were unable to take their full annual leave entitlement due to sickness are entitled to carry over any unused holiday into the next holiday year (and, if they leave with that holiday still having been accrued but untaken, are entitled to payment in lieu of their untaken leave upon the termination of their employment).

However, in Sash Window Workshop v King, the Employment Appeals Tribunal ("EAT") has potentially extended the scope for employees who are otherwise unable or unwilling to take annual leave because of reasons beyond their control, not just for reasons of sickness.

Mr King was not an ‘employee’ but could still bring a complaint of unpaid holiday, by virtue of the fact that he was considered to be a ‘worker’ for the purposes of the Working Time Regulations 1998.

Mr King argued that he had been unable to take his full annual leave entitlement because he was not paid for it. The EAT found no evidence of this as his requests for holidays had not been turned down and he was able to attend work during those periods and so, financially, had suffered no detriment. As a result, the EAT overturned the original decision of the Employment Tribunal, (which had originally found that in Mr King’s favour).

Even so, whilst Mr King was not successful, the EAT did comment in this case that there could be a valid claim where holiday has not been taken because of circumstances outsider of someone’s control and should not necessarily be limited to where someone is prevented from taking their accrued leave due to sickness only. However, on a practical level, it seems most likely to only arise in respect of cases where the individual has, by not taking their leave, suffered a financial detriment.

So, perhaps it doesn’t have such broad application as it may first appear. Even so, employees who are absent due to time off for dependants or other leave could, in theory, rely on this principle and so it is one to watch out for. .

The case has been remitted back to the Employment Tribunal for a final judgment and so we await its outcome which will address whether someone who has been unable to take leave for any reason can pursue a claim for unused holiday, regardless of whether the failure to take annual leave is caused by sickness or otherwise, and regardless of whether the worker or employee is physically at work at the relevant time. If so, it is yet another holiday pay related case that employers will not read with much enjoyment.