Sick Employee Could Carry Untaken Holiday Over to Next Leave Year

In NHS Leeds v. Larner, the Employment Appeal Tribunal (EAT) ruled that an employee who had been off sick for an entire leave year without requesting any statutory holiday – i.e. the 28 days’ holiday to which she was entitled under the Working Time Regulations 1998 - was entitled to a payment in respect of that untaken holiday when her employment terminated.

Background

The relationship between annual leave and sick leave has been considered by the European Court of Justice (ECJ) a number of times in recent years:

• In Stringer v. HMRC, the ECJ confirmed that employees on sick leave must continue to accrue holiday rights. It was for Member States to decide whether employees can actually take their statutory holiday during a period of sick leave. However, if employees are prevented from taking their holiday because of sickness, they must be allowed to take it following their return to work, even if this means carrying it over to the next leave year.
• In Pereda v Madrid Movilidad SA the ECJ ruled that, where an employee's prearranged statutory holiday coincides with a period of sick leave, he must have the option to designate an alternative period for the exercise of his holiday entitlement. So, although under the Working Time Directive workers may be allowed to take holiday during sick leave, if they do not wish to do so the holiday must be granted at a different time, even if this means carrying it over to the next leave year.
• However, in the most recent case, KHS AG v Schulte, the Advocate General suggested that the Directive does not require that employees on long-term sick leave retain accrued leave indefinitely. In her view:
• To allow an employee to take accrued leave several years after the leave year to which it related would not achieve the Directive's health and safety purpose of enabling the worker to recuperate from the effort and stresses of that year.
• A German law under which annual leave entitlement was extinguished 18 months after the end of the relevant leave year did not offend against the Directive. However, a carry-over period of only six months would be insufficient.
The ECJ has yet to reach its decision in Schulte. It is not obliged to agree with the Advocate General's opinion, although it does so in the majority of cases.
There have been a number of cases – some of which are not very easy to reconcile – where the EAT has had to consider how far the Working Time Regulations could be interpreted in line with EU law as laid down by the ECJ.

The Larner Case

Mrs Larner worked for NHS Leeds as a clerical officer. She went on sick leave on 5th January 2009. She did not return to work, and on 8th April 2010 NHS Leeds terminated her employment on grounds of capability. Mrs Larner brought a claim for her untaken holiday entitlement for the leave year from 1st April 2009 to 31st March 2010. The Employment Tribunal upheld Mrs Larner’s claim.

NHS Leeds appealed to the EAT, arguing that Mrs Larner had lost her statutory holiday entitlement for 2009 / 2010 leave year as she had not given notice that she wished to take it before that date. Dismissing the appeal, the EAT confirmed that the right to leave was not conditional upon the employee giving such a notice or making a request for leave.

Where Are We Now?

To be frank, the law is in this area is in a bit of a mess. Earlier this year, the government issued a Consultation on Modern Workplaces in which it proposed amending the Working Time Regulations so that where an employee is unable to take their annual leave due to sickness absence, or falls sick during scheduled annual leave, and it is not possible to reschedule the leave in the current leave year, he will be able to carry it over into the following leave year. Employers will be able to require employees to take unused leave in the current leave year if there is an opportunity for them to do so or, where there is a business need, to insist that the unused leave is carried forward to the following leave year. However, it is proposed that the changes will only apply to the four weeks’ annual leave required by EU law. They will not apply to the right to an additional 1.6 weeks annual leave which is purely a right under domestic law.

Pending amending legislation, the advice to employers must be to err on the side of caution and treat with sympathy requests by sick employees to carry unused annual leave over to the next leave year.

If you would like to know more, please contact Nick Crook or Gareth Pobjoy.

Filed: 07/09/2011 12:40:35