Holiday Pay and the Atypical Worker

Under the Working Time Regulations, workers are entitled to 4 weeks paid holiday per year. Recent case-law has made it clear that 'worker' is a very wide category and individuals who have traditionally been thought of as self-employed may fall within it, giving them rights to holiday pay.

One such example can be seen in the case of Canada Life v Gray . This concerned two consultants used by Canada Life to sell policies on a commission only basis. Under their commission agreement, there were no provisions for holiday pay. However when their engagements terminated, they claimed arrears of holiday pay from October 1998 when the Working Time Regulations came into force.

The Employment Tribunal upheld their claims, deciding they were 'workers'. They satisfied the statutory definition as they were engaged under a contract 'to perform personally any work or services'. As a result, both received substantial arrears of holiday pay -in Mr Gray's case the award was over £30,000.

On appeal the employers did not challenge the finding that the consultants were workers. Instead the focus was on two other issues:

Could the consultants claim holiday pay regardless of whether they actually took 4 weeks leave during the relevant years; and

were the claims time barred?

The EAT found for the consultants on both points, holding that although holiday pay should be paid during employment at the time holiday is taken, there is no policy objection to the entire amount being payable in lieu on termination. This curious distinction was justified because otherwise a bad employer could defeat the Regulations by refusing holidays during employment and then escape payment on termination as well. The EAT also confirmed that in a post termination claim it was irrelevant whether holiday had actually been taken. It also held that such claims could be brought under the Employment Rights Act as unlawful deduction of wages and thereby cover the whole series of non-payments of holiday pay back to 1998,provided they were brought within 3 months of the final commission payments being made.

Practical Implications

Employers use all sorts of atypical staff from time to time, describing them by various labels; self-employed, consultants, casuals, temporaries. The label is misleading: for holiday pay purposes (and many other purposes -for example, discrimination protection)what counts is the legal definition of 'worker'; do they have contracts to work personally, as opposed to being...