Nominal payments for untaken holiday on termination are unlawful

Facts

The claimant, Ms Podlasiak, worked for Edinburgh Woollen Mills on a zero hours contract. When she resigned to look for other work, she was still owed three days of untaken holiday. A term in her contract of employment said that on termination of the employment contract, she would be paid the token sum of £1 for any untaken holiday. Had she worked for those three days instead of being on holiday, she would have earned £176.

Ms Podlasiak brought a tribunal claim for her unused holiday pay under the Working Time Regulations (WTRs). The employment tribunal agreed that she was entitled to be paid for this holiday. Relying on the European Court cases of SchultzHoff v Deutsche Rentenversicherung Bund and Stringer v Her Majesty’s Revenue and Customs [2009] EUECJ C350/06, the tribunal said that any contract term about how much holiday pay a person will receive on termination must pay the employee an amount equal to whatever they would have earned had the leave been taken. Anything less than the full wages that Ms Podlasiak would have earned by taking the holiday was a breach of the Working Time Directive and unlawful.

Commentary

Although this is a tribunal decision only and is therefore not binding, it follows binding European authorities on holiday pay and is therefore important, especially for zero hours contract workers whose contracts include this kind of term.