Client Alert – UK Holiday and Sickness Update

Labour, Employment and Immigration Update

There have been a number of UK and European cases on the relationship between statutory holiday entitlement and sickness absence. We set out below a summary of two recent decisions in the Court of Appeal (“CA”) and European Court of Justice (“ECJ”) which shed further light on some of the key issues.

Untaken annual leave due to illness carried over automatically

NHS Leeds v Larner [2012] EWCA Civ 1034

The CA has held that a worker who has not taken their statutory holiday entitlement due to long term sickness is entitled to carry over the holiday to the next leave year without the need to make a specific request to do so.

The EU Working Time Directive (the “Directive”) provides that member states must ensure that every worker is entitled to paid annual holiday of at least four weeks. This is implemented in the UK by the Working Time Regulations 1998 (“WTR”) which entitle workers to 5.6 weeks’ paid holiday in each leave year.

In this case, Mrs. Larner who worked for the NHS had been on sick leave for an entire leave year when the NHS terminated her employment by reason of capability. She had not asked to either take or carry over her holiday during the year in which she was on sick leave. On her termination, the NHS only paid Mrs. Larner for holiday accrued in the year of her termination and refused to make a payment with respect to her accrued but untaken holiday for the previous year for which she was on long-term sick leave. Mrs. Larner brought a tribunal claim seeking payment in respect of her unused statutory holiday entitlement during her sickness absence which was upheld in both the tribunal and the EAT.

The CA upheld the decision and described the law as “certain and clear”. It was clear that Mrs. Larner had been prevented from taking her statutory holiday entitlement due to sickness. She was, therefore, entitled to carry over her untaken leave to the next leave year without the need to formally request the carry over. As Mrs. Larner’s employment was terminated before she could take the carried over leave, on her termination she was entitled to payment for this holiday entitlement. The CA did not decide whether these principles apply only to the basic four weeks’ leave under the Directive or the additional 1.6 weeks’ leave under the WTR, however, the CA did refer to the decision in Neidel [2012] in which the ECJ decided that national law could prevent carry-over of any period of domestic leave additional to the basic four weeks, even if the worker had been prevented from taking the additional leave due to sickness.

Practical Implications

This case confirms that an employer should allow a worker to carry over their accrued holiday entitlement if they have been on long-term sick leave and have not had the opportunity to take holiday, without the need for a worker to make a request to do so before the expiry of the leave year. In order to avoid extensive carry-over of holiday entitlement by employees on long term sick leave, employers may wish to consider highlighting to employees that they can take their holiday during sick leave. Employees cannot be forced to take their holiday during sick leave, however, employees who are on reduced or no pay may prefer to take holiday during their sick leave.

Worker falling ill on holiday entitled to take annual leave at later date

ANGED v FASGA and Others C-78/11

The ECJ has held that workers who become ill during a period of statutory annual leave are entitled to reschedule the period of planned leave to a later date.

This case concerned a Spanish collective agreement which expressly allowed workers to rearrange a planned period of paid annual leave where the leave coincided with a “temporary disability” resulting from pregnancy. However, there was no similar entitlement for workers to reschedule annual leave with respect to general ill health.

The ECJ decided that the approach in the collective agreement was contrary to the Directive and that if a worker is ill during a period of paid annual leave they should be permitted to reschedule the leave and the time they were ill whilst on holiday should be classed as sick leave. This is not a surprising decision as it follows the earlier ECJ decision in Pereda v Madrid Movilldad [2009] in which it was held that a worker who becomes ill before a period of planned statutory annual leave is entitled to take that leave at a later date. This recent case now makes it clear that the same approach is taken where a worker falls ill during the leave period.

Practical Implications

It is now clear that a worker who becomes ill either before or during their statutory annual leave is entitled to take the leave in which the worker was ill at a later date. It is arguable that, particularly where an employer has an enhanced sick leave policy, there is a risk that some employees may try to acquire extra holiday by falsely claiming that they were ill while on holiday and asking to reschedule their leave. There will also be practical difficulties with establishing whether an employee was genuinely ill during a period of annual leave and for what period they were actually ill. For example, it may be difficult for employees holidaying abroad to obtain a sick note. These issues should be addressed in employers’ sickness policy, for instance, including appropriate notification requirements for sickness on holiday.

The WTR currently do not address this issue. However, the Government’s Modern Workplaces Consultation looks at amending the WTR in light of the recent ECJ decisions and its proposals, which relate only to the minimum four weeks’ annual leave required by the Directive, reflect this decision. The Government’s response to the Consultation has not yet been published, however, in the interim, it is likely that tribunals will interpret the WTR in line with the recent decisions by the ECJ on this issue.

If you have any questions regarding this update, please contact the Sidley lawyer with whom you usually work.

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