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31 July 2012

Holiday and Sickness Absence

The Court of Appeal has handed down its judgment in the case of NHS Leeds v Larner, dealing with the issue of carrying forward accrued holiday entitlement during sick leave.

In this case, the Employment Appeal Tribunal (EAT) had ruled that an employee who was dismissed after a long period of sickness absence was entitled to be paid in lieu of all her accrued holiday.  The EAT was satisfied that she was entitled to be paid in lieu of the full amount, including in respect of the previous holiday year, even though she had not made any request to carry the leave forward.

Following this decision, the case of Fraser v Southwest London St George’s Mental Health Trust was heard by a different division of the EAT, which concluded that in order to be entitled to carry the leave forward to a subsequent holiday year, the employee must expressly request to take the leave.

As a consequence of these two EAT decisions we had conflicting authorities on the issue.  The case of NHS Leeds v Larner was then appealed to the Court of Appeal and was heard on 27 March 2012.   The decisions was handed down on 25 July 2012.

The Court of Appeal has upheld the EAT decision, meaning that a worker who has been on long-term sick leave can claim a payment in lieu of his or her accrued holiday entitlement in full, regardless of whether they made any request either to take the leave or to carry the leave forward to the next holiday year.

In handing down its judgment, the Court reviewed the numerous European decisions on the issue of statutory holiday entitlement during sickness absence under the provisions of the Working Time Directive (WTD).  The Court was satisfied that Article 7 of the WTD, which provides the right to  paid annual leave, does not impose any requirement for the worker to make a prior leave request in order for the holiday entitlement to be carried forward to a subsequent holiday year.

Crucially for private sector employers, the Court also ruled that it was possible for the Working Time Regulations 1998 to be interpreted in light of the European rulings on Article 7 WTD.  This means that employees working in the private sector, as well as those in the public sector, can rely on these European decisions to pursue a claim for any unpaid holiday entitlement on termination of their employment.

Comment

This decision means that, subject to any further appeal to the Supreme Court, employers will now have very little scope for refusing to pay employees in respect of their accrued holiday, if their employment is terminated following a long period of illness.

The Government is due to be issuing draft amendments to the current Working Time Regulations in order to take account of the European decisions on the issue of annual leave entitlement and sickness absence.

A copy of the Court of Appeal judgment is available here