On 29 November 2017, the Court of Justice of the EU answered preliminary questions on the accumulation of holiday rights of a pseudo self-employed person. What is special about this judgement is that the Court has ruled that these holiday rights can accumulate unrestrictedly – and therefore do not lapse or expire on the basis of national legislation – if the pseudo self employed person (employee) has not been able to exercise his right to paid holiday.
Background and ruling
From 1 June 1999 until 6 October 2012, British citizen Conley King worked for Sash Window Workshop as a self-employed person. Mr King worked on commission basis and was not paid during his holidays. When Mr King retired on 6 October 2012, it became clear that this was a case of pseudo self-employment and that on the basis of European and national legislation Mr King had been entitled to paid holiday during all those years.
Mr King commenced a claim before the Employment Tribunal (employment court in first instance in the United Kingdom) to obtain compensation from his former employer for the accrued holiday rights that he had not used (because for the holidays he had taken he was not paid and because he had taken fewer holidays than he was entitled to).
The Employment Tribunal awarded his claim. His former employer appealed to the Employment Appeal Tribunal (employment court of second instance of the United Kingdom). The Employment Appeal Tribunal allowed the appeal of the employer and referred the case back to the Employment Tribunal. Both Mr King and the employer appealed against this ruling to the Court of Appeal.
The Court of Appeal determined that Mr King had indeed been an employee and was therefore entitled to paid holiday. The Court of Appeal was, however, unable to properly judge whether Mr King was entitled to compensation for paid holiday not taken which according to national law had actually expired. The crux is that Mr King – so he argues – had not been in the position to actually take these paid holiday days as his employer refused to continue to pay him. The Court of Appeal put questions on this to the Court of Justice.
The Court of Justice ruled that the right of employees to a minimum number of paid holiday days (at least four weeks) may not be excluded or restricted. In a previous case, the Court of Justice also ruled that if an employee has not been able to take his (statutory) holiday days before the end of his employment contract, (due to long-term incapacity for work for example), he retains the right to such (paid) holiday entitlements.
However in that case, the Court of Justice also ruled that the employer can be protected by national legislation against unlimited accumulation of holiday days of an employee who is unfit for work. European legislation in respect of minimum holiday rights for employees does not oppose this. The holiday days of an employee who has not been able to take these days due to illness may therefore expire at some time (in the Netherlands for example, this is five years after the end of the calendar year in which they were accrued).
Ruling of the Court of Justice
The current issue is different from the previous cases that the Court of Justice had examined, so ruled the Court. Mr King was not unfit for work and there is therefore no reason to protect the employer against a too large accumulation of holiday rights. After all, Mr King’s employer has been favoured over all those year as Mr King had not enjoyed paid holiday. According to the Court of Justice, this is not related to the expiry of holiday rights. The Court of Justice gives two reasons for this:
- the employer would be unlawfully enriched by expiry;
- this would impair the objective of the European legislation that grants employees minimum holiday rights. This objective is respecting the health of employees (the recuperative function of holiday).
Mr King is therefore entitled to payment of compensation for the holiday rights not enjoyed that he had accrued during his entire employment (of thirteen years).
What might this mean for Dutch practice?
That a pseudo self-employed person can exercise particular rights – such as the right to paid holiday days and holiday allowance – is nothing new or surprising. This ruling by the Court of Justice can, however, be important for the question how far back these holiday rights of pseudo self-employment persons go.
In principle, on the basis of Dutch legislation statutory holiday days expire six months after the calendar year in which they were accrued. Holiday days over and above the statutory minimum expire five years after the end of the calendar year in which they were accrued. The question is how to deal with this if an employee has not been given the opportunity by his employer to ever take these days as the employer refused to pay these holiday days.
Although the ruling of the Court of Justice pertains to the situation of a pseudo self-employed person, it is not restricted to this and in principle relates to all employees in a comparable situation as that of Mr King. I can, however, imagine that – apart from pseudo self-employment – there is unlikely to be a situation in which an employee was actually unable to take holiday and would not object to this himself at an earlier time than on the termination of his employment.
For pseudo self-employed persons, this ruling is in my view interesting and relevant. If at any time it is established that there nevertheless is (has been) an employment contract, a pseudo self-employed person has a claim for paid holiday days or (if the employment is already terminated or is being terminated) to compensation of the accrued holiday rights (statutory holiday rights accrued can after all not be bought off during the employment).
Although holiday days do not a accumulate endlessly on the basis of Dutch law and lapse or expire after a particular period, this ruling by the Court of Justice could also mean that pseudo self-employed persons can as yet exercise all their holiday rights – without lapse or expiry. It is wait and see how the Dutch Courts are going to handle this.
By Eva Traag