In the recent case of Pimlico Plumbers v Gary Smith at the Supreme Court, it was decided that Mr Smith - a heating engineer - is entitled to backdated holiday pay.
Gary Smith had worked on a self-employed basis for Pimlico Plumbers - a London leading maintenance and service company - between 2005 and 2011.
Despite being self-employed, Mr Smith was of the opinion that he should be paid for leave. The company disputed this, stating that Mr Smith was self-employed and that they were not liable for his holiday pay. This resulted in Mr Smith taking the company to an employment tribunal - followed by an employment appeal, both of which rejected his claim.
In finding for Mr Smith, the Supreme Court held him to be a worker for the purpose of the Working Time Regulations - and established a new guiding principle for courts. In reversing the employment tribunal and the employment appeal decisions, the Supreme Court also decided that he should receive compensation for all the unpaid leave he took during his six years of work for Pimlico Plumbers.
Experts say that this decision could also have an impact on other businesses whose workers were previously - and incorrectly - classed as self-employed.
Glenn Hayes - an Employment Partner at Irwin Mitchell - said:
“This is a significant ruling not just for Pimlico Plumbers but all businesses with workers who were previously classified as self-employed. As Mr Smith’s case shows the financial cost of missed holiday pay can be significant and I suspect many organisations will be deeply concerned by this ruling.”
Stephen Ratcliffe - Employment Partner at Baker McKenzie - stated that companies who engage self-employed workers face the risk of legacy claims on underpayment of holiday pay.
He stated:
“For those who engage people on a self-employed basis the risk of claims that the individual was actually a worker or an employee is compounded by the risk of similar legacy claims for holiday pay. Perhaps most significantly, the Government enacted a two-year backstop on these kinds of holiday pay claims, because of concerns over the potential multi-billion-pound bills which employers might otherwise face for many years of holiday pay. This decision opens up scope for a future case to challenge whether that backstop is lawful.
He went on to warn that employers need to take this case seriously, adding:
“With the combination of this case and the proposed focus of the Government’s Single Enforcement Body on holiday pay compliance, employers really need to focus on how they calculate holiday pay now, or else face what may be enormous holiday pay liabilities going back very many years.”
Dave Chaplin - CEO of tax compliance firm IR35 Shield - commented:
“It reinforces the need for firms to correctly classify their workers and provide associated rights that go with being a worker or employee. Moreover, the ruling appears to indicate that unpaid holiday pay will roll over each year, indefinitely, in instances where the employer has not taken the necessary steps to ensure the holiday is taken.”
