In this article we look at two recent decisions – one in the Employment Appeal Tribunal and another in the European Court of Justice, and how they affect an employee’s holiday entitlement when they are on long-term sickness absence.
The general rule in relation to holiday pay is clear; an employee (or worker) must actually take their entitlement to holiday leave during the leave year to receive payment for it, and an employee is unable to carry over such entitlement into the next leave year (i.e. ‘use it or lose it’).
This rule is altered where the employee has not “had the opportunity” to take their leave as a result of sickness absence. In these cases, the employee should be entitled to carry over their entitlement into the next leave year or receive payment for it upon termination of their employment. This was established in the cases of Stringer and Pereda (and covered in our previous updates here). This seems straightforward enough, although many people still struggle with the concept that those who are off sick are entitled to holiday.
However, in the recent case of Fraser v Southwest London St George’s Mental Health Trust which was heard in the Employment Appeal Tribunal, a claim for such payment relating to a number of previous years of holiday pay where the employee had been on long-term sickness absence was rejected on the basis that the employee in question had not given notice of intention to take her leave entitlement and receive payment for this. Notice is required in regulation 15 of the Working Time Regulations.
The employee tried to overcome this point by pleading that her employers should have made her aware of this requirement, but this was overruled on the basis that employers are not generally required to make an employee aware of his or her statutory rights. Employers are of course responsible for providing employees with details of their terms and conditions of employment, but this duty does not necessarily extend as far as pointing out the employees’ rights.
Please note that the decision in this case does conflict with a previous decision in the case of NHS Leeds v Larner  which said that such notice is not required in order for the carryover of untaken leave. The Larner case is set for further consideration by the Court of Appeal later in 2011 or early 2012 and may determine the final position. We will of course keep you updated on developments.
Another key judgment on this topic was issued last week by the European Court of Justice (ECJ) in the German case of KHS v Schulte. Under German law, accrued leave must be taken within the calendar year, and carry forward of leave is only permitted where there are operational reasons, or “compelling” reasons relating to the individual. If carry forward takes place, the leave carried forward must be taken within 3 months of the end of the calendar year. In this case there was also a collective agreement stating that in the case of illness, leave would lapse 15 months after the end of the calendar year.
The ECJ found that a worker who is off sick for a considerable period cannot have the right to continue to accumulate leave indefinitely during that period, as this would no longer reflect the purpose of the Working Time Directive. The ECJ distinguished between two purposes for annual leave – firstly, to give a worker a rest from work and secondly, to give a period of relaxation and leisure. In the Court’s view, beyond a certain point leave would cease to be a rest period and would then only be relevant as relaxation and leisure, which was not the intention of the Working Time Directive.
The ECJ then went on to find that 15 months was a reasonable period after which annual leave would cease to constitute a rest period. It was emphasised that carry forward must take account of the worker’s individual circumstances and the carry forward period must be substantially longer than the period in which that leave had accrued.
Unfortunately the Schulte case leaves a lot of unanswered questions here in the UK where the Working Time Regulations do not permit carrying forward any leave at all. It is not clear how this decision would be applied in practice. Some employers might want to include a specific provision to state that those on long-term sickness absence will only be able to carry forward their leave for a limited period – but it is not clear how effective this will be under the law in this country. Our view is that for the time being it is probably best for employers to sit tight and wait and see how the law develops.
The Goverment have indicated that legislation may be introduced to deal with this situation at some point during 2012 as part of their reform of employment law. We understand that the plan is to amend the Working Time Regulations to state that carry forward should be allowed – at the moment no details of a specific period have been given. We will of course keep you informed of any developments as they happen.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected])