A former Pimlico Plumbers heating engineer has a won a lawsuit in the Supreme Court, which found he is entitled to back-dated holiday pay.
The Employment Tribunal and the Employment Appeal Tribunal had previously rejected his claims.
Gary Smith, had worked for the famous London plumbing brand between 2005 and 2011.
He took Pimlico Plumbers to court after saying he needed to be paid for leave, but the company disputed this. It deemed Mr Smith as self-employed and believed it was not liable for his holiday pay.
However, this judgement means that any worker, including self-employed workers are entitled to paid leave, but it is the employer’s responsibility to ensure they are aware of this.
Long reaching impact
Experts say the decision could also impact on other businesses whose workers were previously and incorrectly classed as self-employed.
Commenting on the case, 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 is Employment Partner at Baker McKenzie says companies that engage self-employed workers face the risk of legacy claims on underpayment of holiday pay.
He said: “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.
Classify workers correctly
“He warned that employers need to take this case seriously, saying: “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 also commented that the case was a warning for firms who hire people on a false-self-employed basis.
He said: “ 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.