EU Court Expands Penalties for Independent Contractor Misclassification

UK england independent contractor misclassification

Crikey! Across the pond, worker misclassification is a hot topic, and the European Court of Justice (ECJ) has turned up the heat on companies using independent contractors.

In a closely watched case, the ECJ ruled that a commission-only sales contractor who was  misclassified was entitled to receive payment for four weeks of annual holiday pay for the entirety of his engagement, 13 years, covering 1999 to 2012.  The case is King v Sash Window Workshop Ltd., decided 29/11/2017 (US translation: 11/29/2017).

In the US, back pay in misclassification cases is often limited to two or three years. Statutes of limitation generally limit how far back a worker can go when seeking a recovery. But what about Europe?

Let’s see. The European Court acknowledged that UK law allows four weeks of annual leave and does not allow unused weeks to be carried over to the following year. Ok, that’s a good start and suggests back pay should be limited.

So when a salesman like Mr Conley King alleges that he was denied four weeks of annual leave for a 13-year period, shouldn’t the recovery be limited? The most he could ever have is four weeks, right? In the US, the recovery likely would be limited, either because a court would apply the no-carryover rule or because the statute of limitations would limit the recovery to two or three years of lost leave.

Not so under UK and EU law, the European Court ruled.

The court awarded the salesman pay for four weeks of paid leave for all 13 years. That’s a 42-week paid vacation. Call my travel agent, honey. We’re going around the world!

The court ruled that, while a UK business may prevent carryover of unused holiday leave for its workers, its failure to offer holiday leave required a different result. Since the business prevented the worker from using any of his four weeks of leave in each of his 13 years, the business was now on the hook for the full four weeks for all 13 years that it deprived the worker of his paid holiday leave.

The case now goes back to a UK Court of Appeal.

Meanwhile, the decision raises the stakes on European companies who misclassify workers as independent contractors. The lookback period for lost benefits may now be unlimited, with statutes of limitation being ignored.

US companies with overseas independent contractors should pay close attention to those relationships. If the independent contractor status of those relationships is challenged, the business may be liable for substantially more past benefits than previously thought. That may mean rough seas ahead.

© 2017 Todd Lebowitz, posted on WhoIsMyEmployee.com, Exploring Issues of Independent Contractor Misclassification and Joint Employment. All rights reserved.

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