ECJ Talks Sense on Holiday Pay and Sick Leave

In a recent case the European Court of Justice (ECJ) ruled that EU law does not require the unlimited accumulation of annual leave by an employee who is on sick leave for several years. This is the latest in a series of cases dealing with the right to carry unused holiday forward. The story so far

KHS AG v Schulte concerned the legality of a tern in a German collective agreement. This stated that leave not taken during the leave year because of sickness could be carried forward but stipulated that it had to be taken within 15 months of the end of the holiday year in question. S had been off sick for six years. When he was eventually dismissed he claimed holiday pay in respect of several years when he had not been able to take annual leave.

Following the opinion previously given by the Advocate General, the ECJ ruled that the limitation on S's right to carry forward untaken annual leave was compatible with EU law. The latter does not mandate a right to carry leave forward indefinitely. The Court indicated that any limitation must be substantially longer that the reference period for the leave (i.e. the holiday year) and allow employees to plan their carried over leave, but it must also protect employers from the possibility of employees accumulating long periods of holiday entitlement, thereby potentially making difficulties in organising work later. In so ruling, the ECJ indicated the purpose of the right to annual leave is to promote the health and safety and general well-being of employees. If large amounts of leave are carried forward, it becomes merely a matter of relaxation and leisure. This is not the basis for the entitlement.

Where does this leave employers? Under the Working Time Regulations 1998 as presently worded, there is no express right to carry untaken annual leave forward. However, the Regulations must be read subject to the developing ECJ case law. The Coalition Government has previously indicated that it is considering introducing a right for sick employees to carry untaken annual leave forward, subject to a time-limit. The ECJ's judgment in the KHS case suggests that any reasonable limitation on the right to carry forward that is introduced is likely to be compatible with EU law.

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

Filed: 10/01/2012 10:47:51