Last month, the Court of Appeal handed down a landmark judgment that will have far-reaching consequences for employers.   

The court decided that Mr Smith, a former worker of Pimlico Plumbers, was entitled to several years of backdated holiday pay that he wasn’t paid while he was with Pimlico.  

Some of you are probably wondering why he wasn’t paid his annual leave in the first place.  

Good question. The answer: the gig economy.  

The gig economy is characterised by individuals getting paid for the ‘gigs’ they carry out on behalf of certain companies. The most notable company utilising this form of labour that you’ve probably heard of is Uber.  

Over the past years there have been ground-breaking cases against Uber and Pimlico Plumbers relating to the employment status of their workforce. 

These corporate giants argued that their drivers / plumbers were self-employed.

It was in the interests of the firms to do this as granting someone the employment status of a ‘worker’ for the purposes of the Working Time Regulations – rather than self-employed – means they must be paid the national minimum wage and holiday pay. A range of other rights are also granted to workers that are not available for people classed as self-employed.

There is one more class of employment status, which is that of an employee – and they generally have better rights than a worker.  

The court decided a couple of years ago that the employment status of the drivers and plumbers undertaking work for Uber and Pimlico Plumber, respectively, was indeed that of a worker. 

These decisions have opened the floodgates for a range of other questions to be answered in court. And that’s where our Mr Smith comes in.  

Mr Smith took annual leave while he was with Pimlico Plumbers. He was never paid for this annual leave because he was considered self-employed at the time that he took it.  

However, after successfully bringing a claim against Pimlico to determine that he was not self-employed, but rather, a worker, he then sought to recover all the unpaid leave he took whilst with Pimlico.  

The leave in question related to the annual four weeks a ‘worker’ is entitled to under the Working Time Directive.   

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Until the decision in Smith, the position was that a worker could only bring a claim for unpaid leave that was not taken if they weren’t granted their annual entitlement, or if they did not take the entitlement and were not warned by their employer that they would lose it if they did not take it. In this instance, the leave would rollover from the previous year and you could claim for it when your employment terminated.   

The Smith case has extended the principle to leave that was taken but not paid. 

To bring a claim for non-payment of annual leave, you were expected to do so within three months of the last non-payment. However, the court decided this should no longer be the case and a claim brought within three months of the date the employment relationship ends would be justiciable – rather than the date of the last non-payment.  

The court also held that Mr Smith was entitled to claim for the 6 years’ worth of annual leave he took while with Pimlico instead of being limited to the 2-year backstop set out in the Deduction from Wages and (Limitation) Regulations 2014 – which was introduced to limit the amount of non-payments claimed.  

Finally, in order to succeed in these types of claims, it was generally understood that if a series of non-payments was broken by a gap of more than three months, the claim would fail.  

The court said in obiter (another one for you Latin buffs – meaning, something said in passing, so not legally binding) that it did not think a gap of three months should result in a claim failing.  

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In short, the judgment is huge.  

Although the claim was issued before Brexit (it took a few years to reach the Court of Appeal), the terms of the UK’s withdrawal agreement and the reasoning of the court is incredibly significant for claims of this nature.  

For those in the gig economy or any business who use self-employed contractors, there could be holiday pay claims on the horizon – because those contractors could in fact be workers.  

For anyone interested in a little light reading before bedtime, you can find the full judgment here.  

Jonathan Williams is a solicitor at Watkins and Gunn. Disclaimer: This does not constitute legal advice. For more information contact Watkins and Gunn at watkinsandgunn.co.uk.  

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