UK ; Court of Appeal, Case No: A2/2021/1097, Gary Smith v. Pimlico Plumbers Limited

On 1 February 2022, the England and Wales Court of Appeal handed down a judgment of significance for workers who have been incorrectly classified as independent contractors, regarding the matter of paid annual leave. This case concerns the application of the right to paid annual leave, as guaranteed by Article 7 of EU Directive 2003/88 of 4 November 2003, and by Article 31 of the Charter of Fundamental Rights of the European Union.
The respondent Pimlico Plumbers argued that Gary Smith, who had worked for the company as a plumber from 2005 to 2011 was not an employee, but a self-employed independent contractor and although he was entitled take leave, this was unpaid leave. After his contract was terminated by the company, Gary Smith took his case to the Supreme Court and won recognition as a “worker”*, thereby entitling him to four weeks’ paid leave under the UK legislation transposing the European directive. Pimlico Plumbers argued that because Gary Smith had taken his leave entitlement, he had benefited from the rest periods provided for by law. However, as he had not requested payment for this leave within the two-year time limit provided for by law, it was too late to him to seek redress.
This line of reasoning was followed by the lower court, but rejected by the Court of Appeal. Relying on the King judgment (CJEU, 29 November 2017, Case C-214/16), it points out that the right to paid leave is one and the same right: a right to leave, and to paid leave. The Supreme Court holds that if the worker takes unpaid leave because the employer disputes this right and refuses to pay him or her, then the worker is not exercising his or her right to take paid leave.
Although domestic legislation may stipulate that leave entitlement lapses at the end of each year if the worker has not taken it, the Court takes the view that if they are to lose this leave, the person concerned must have had the option of exercising the right conferred on them. Consequently, a worker can only lose his or her leave entitlement if the employer can prove that it specifically and transparently gave the worker the option to take it, and informed the worker that his or her entitlement would be lost at the end of the year if he or she did not take it. If the employer fails to discharge this obligation, the entitlement to paid leave is not extinguished, but continues accumulating until the employment relationship comes to an end, at which point the worker is legitimately entitled to payment for all leave taken but not paid, with no time limitation.
According to some experts, this decision is expected to particularly affect digital platforms employing workers who are incorrectly classified as independent contractors, and whose employment status might now be reclassified as employees or “workers”.
* “worker”: a hybrid status under British law, granting a number of social rights
(article published in IR Notes 179, 9 February 2022)