A Tribunal has recently decided that an individual engaged as a temporary worker by an agency was entitled to accrue holiday pay during the period on which she was placed on furlough; she therefore succeeded in her claim for unauthorised deduction of wages in relation to non-payment of accrued holiday pay.

Facts of the case

Miss Healy was engaged by Start People Limited (an agency supplying temporary and permanent staff to businesses around the UK) under a “Contract for Services for Temporary Workers” from 25 February 2020 until 31 July 2020. She worked on a single assignment from her start date until 24 March 2020 (20 days), when the client for whom she was working asked Start People Limited to furlough her (and another colleague) under the Coronavirus Job Retention Scheme (CJRS) as they wished to keep her services after furlough/lockdown had ended. Miss Healy remained on furlough and never returned to work again before she resigned on 31 July 2020.

Miss Healy received accrued holiday pay for the 20 days that she had worked, however, she was not paid any accrued holiday pay for the period she was placed on furlough, i.e. from 25 March 2020 to the day she resigned on 31 July 2020.

Thereafter, Miss Healy presented a claim of unauthorised deduction of wages in respect of her accrued holiday pay during this period.

Judgment

Start People Limited tried to argue that it had relied on the UK Government’s own website and a supporting article on the website of a national firm of solicitors to justify its refusal to pay holiday pay to the claimant. The UK government advice was: “Some agency workers on a contract for services may not be entitled to the accrual of holiday or to take holiday under the Working Time Regulations while on furlough because they are not workers or treated as workers under those regulations when between assignments or otherwise not working on assignments. Contracts may nevertheless include holiday provisions which will continue to operate in the same way as they did prior to the furlough period.”

As well as this, Start People argued that Miss Healy’s contract did not require her to be paid holiday between assignments.

Employment Judge Shore, however, did not agree. He referred to the UK Government website which sets out that almost all workers, including zero-hour contracted workers and those on irregular hours contracts, are legally entitled to 5.6 weeks’ paid holiday per year, with the exception being those who are genuinely self-employed. In relation to the CJRS he commented that this “is not legislation: it is a direction with guidance. It does not amend any existing law. Employees and workers had the same rights as before furlough”.

Applying this to Miss Healy, the Employment Judge found that her employment rights remained the same as before being placed on furlough. On the facts, he found that her assignment with the end client had not ended. As such, she continued to accrue holiday pay for the entire period. In addition, there was no need for Employment Judge Shore to make any decisions about any entitlement to holiday pay whilst between assignments.

Start People Limited were ordered to pay Miss Healy ten days’ accrued holiday pay at £65 per day, equalling £650, less any required deductions for tax and National Insurance.

What does this ruling mean for the recruitment sector?

The judgment makes it clear that placing an individual on furlough does not change an individual’s employment rights, including, for example their right to holiday pay. Where a worker’s assignment has not ended by being placed on furlough, they will continue to accrue holiday throughout the entire period in the normal way.

Although this is a first instance decision, which means it is not binding on future tribunals, recruitment agencies and umbrella companies should carefully consider whether this judgment will have any impact on them. There could be wider repercussions of such Employment Tribunal judgments too, such as HMRC conducting in-depth investigations into a company’s use of the CJRS and their application of the rules.

If you have any queries about this decision and the impact it may have on your organisation, or any queries about the CJRS generally, please do get in touch with a member of our Employment Team