Court of Appeal overrules lower courts in Smith vs. Pimlico Plumbers
The Court of Appeal has ruled on the long-running Smith vs Pimlico Plumbers case and overturned the decisions in lower courts to force Pimlico Plumbers to compensate Smith for previously unpaid annual leave.
This case has been going on for a number of years and followed Smith winning an original case in the Supreme Court proving that he was a worker of Pimlico Plumbers and not self-employed.
Despite Pimlico Plumbers agreeing that Smith was entitled to paid holiday, they argued that he had lost the right to claim it by leaving it too late – the so-called “use it or lose it” practice which is fairly commonplace in most regular employment contracts. In fact, the original Employment Tribunal and the Employment Appeals Tribunal agreed with Pimlico Plumbers, but the Court of Appeal has now reversed that and decided that Smith can claim holiday pay for the previously unpaid annual leave he took. This is an extremely important judgement for those who have not been paid for holidays because they were regarded as being self-employed rather than “workers” for the end-client.
Does this mean that all umbrella employees now have the right to pursue claims for holiday pay they didn’t receive? Well, the short answer is no. In the judgement, which was unanimous, Lady Justice Simler states:-
“A worker can only lose this right if the employer can specifically and transparently show that they gave the worker the opportunity to take paid annual leave, encouraged the worker to take paid annual leave and informed the worker that the right would be lost at the end of the year. If the employer cannot evidence this process, then the right does not lapse at the end of the year, it carries over and accumulates until termination of the contract. Upon termination, the worker is entitled to a payment in respect of all of the untaken leave.”
This is a crucial point for umbrellas employers. If they have made reasonable efforts to get their employees to take their annual leave entitlement and the employee has not done so, then it likely they will be unaffected by this judgement.
However. the FCSA Code, from October 2021, on this point (A10) remains very clear; no employee should ever be deprived of holiday pay:-
- A10 a – Confirm that throughout the holiday year and when an employee is approaching the holiday year end (at least four weeks prior), you remind your employees to take holidays
- A10 b – As a responsible employer, you should ensure all employees take and are paid for holidays during the holiday year, or payment in lieu of holiday entitlement on termination of the employment. Any exceptions to this policy should be logged internally, raised and discussed with the FCSA assessors.
As ever, this area of employment law can be somewhat confusing, and it’s notable that this judgement in particular only applies to the four weeks’ leave derived from EU law and not to the additional 1.6 weeks provided in the UK by the WTR.