Smith v Pimlico Plumbers Ltd  CA
The facts of the case
Mr Smith worked for Pimlico Plumbers between 2005 and 2011. For much of that time he was considered “self-employed”. In line with this apparent status, he was informed that any leave taken would be unpaid. He did take leave from time to time, for which he received no remuneration. The relationship broke down in May 2011 and in August 2011 he submitted a claim for holiday pay. More specifically he asked for £74,000 in holiday pay accrued over 6 years.
Little did he know at the time that the saga would still be ongoing some 11 years later and setting down key legal precedents for employers across the country to heed.
The legal questions
The case started with the determination of Mr Smith’s actual status. As we know, naming someone as “self-employed” is simply not good enough. In this case it was established early on that Mr Smith was in fact a worker. Mr Smith was providing personal services and it was not done as part of a professional/commercial relationship. As such he met the criteria under section 230(3) of the Employment Rights Act 1996. As a worker, he was entitled to 5.6 weeks of paid annual leave under the Working Time Regulations 1998.
The questioned posed to this Court of Appeal was this: Was Mr Smith’s claim out of time? He had taken unpaid leave, last, in January 2011. This should have been paid in February 2011. The usual time limit for an unlawful deduction from wages claim is 3 months from the date of the deduction. He submitted his proceedings in August 2011.
In or out of time?
The Court of Appeal decided that the claim was in time, as having been presented within 3 months of the working relationship ending.
In doing so, it followed and clarified the decision handed by the Court of Justice of the European Union in King v. Sash Windows (2017). The right to paid annual leave is one single composite right which must be looked at as a whole and not as a sum of two parts. Discharging that obligation must be done by allowing both the time off and paying the appropriate rate, not just one or the other.
Paid leave has its roots in EU legislation (Working Time Directive) and is about protecting workers, about health and safety and affording them a minimum period of rest and recuperation. Not paying that time would intrinsically defeat that aim. Domestic legislation can provide for annual leave entitlement to be lost if unused at the end of the leave year, but this can only be relied on if the employer has provided a genuine opportunity for workers to utilise that right; providing accurate and transparent information and encouraging them to take leave.
Otherwise, that right must be carried over and accumulated until the termination of the contractual relationship.
Series of deductions
Whilst the question did not need to be directly addressed, once it was determined that the right to paid leave had accumulated until the end of the employment, regardless of unpaid leave taken or untaken, the Court of Appeal did take the opportunity clarify the legal position on the way in which a series of deductions is ascertained.
A claim for unlawful deduction from wages can be brought to the tribunal within 3 months of it occurring. A series of deductions can be brought as one claim. As such the question that arose was: does a gap of more than 3 months between 2 deductions break that series, thus limiting the value of the claim?
The Court of Appeal here usefully confirms the approach taken in in Chief Constable of the Police Service of Northern Ireland v Agnew ; a series should be looked at as a factual assessment and a gap of 3 months or more between deductions does not automatically bring that series to an untimely end. A series can still be a series even if each event is 4 months’ apart and there is no rationale for transposing the 3 months’ time limit to issue proceedings, into the definition of what is a series, which remains a factual determination.
How far back and how much?
It is worth noting that much of the above is mainly concerned with the interpretation of the EU Working Time Directive. The EU Directive and associated case law are still very much relevant to us today, even post Brexit, based on the terms of the Withdrawal Act.
The EU Directive is concerned with 4 weeks of core annual leave entitlement. The remaining 1.6 weeks that the UK legislation provides for under the Working Time Regulations, is, as such not subject to the same protection that the CJEU has been devising over the years.
In practical terms what does it mean? That it is 4 weeks of annual leave that needs to be carried over when the right has not been exercised for legitimate reasons. The remaining 1.6 weeks can potentially be left behind.
How far back do we go? The Deduction from Wages (Limitation) Regulations was introduced in 2014 limiting unlawful deductions from wages claim to a 2-year timeframe. As such a claim for unpaid holidays should, in theory, go no further back than 2 years from the time the claim is presented.
This limitation did not affect the Smith case as it was presented prior to the 2014 Regulations being introduced but is relevant to claims issued since 2015. However, this is subject to a final proviso on the matter; the King case mentioned above has raised questions as to the legitimacy and validity of any period of limitation (2 years or even our usual 6 years) when it comes to a complete denial of the right to paid holidays (which this case was about). Something to watch out for in the coming years and certainly worth bearing in mind when ascertaining the liability in “wrong status” type of cases.
“The Pimlico case provides some welcome clarification to the murky waters of holiday pay claims and gives us food for thought more generally in unlawful deductions matters.
It confirms what employers must really be watching out for; they must ensure they ascertain the correct status of the individuals working for them (a very hot topic of late!) and in line with that provide them with the information required for them to exercise their rights.
It reminds us that paid leave is viewed as a fundamental right and will be vigorously defended by the Courts as such. It is, after all, about health and safety, about giving workers the genuine ability to rest and recuperate, and the enforcement of that right will be done through this invaluable prism.”