A long-awaited House of Lords decision relating to statutory holiday entitlement during long-term sick leave has finally been handed down, but does it resolve all the issues raised by the case?
Professional Support Lawyer
Elizabeth Stevens
comments:
In January 2009, the ECJ handed down its decision in the conjoined cases of Stringer and others v HM Revenue and Customs (formerly known as Ainsworth v Commissioners of Inland Revenue) (the “Stringer” case) and a German case, Schultz-Hoff v Deutsche Rentenversicherung Bund. Both cases concerned the issue of whether a worker can accrue and take their statutory holiday entitlement under the Working Time Directive during a prolonged period of sickness absence. See our previous news briefing
In summary, the ECJ made the following important ruling:
• Statutory holiday does continue to accrue during sick leave;
• On termination, workers are entitled to be paid in lieu for any holiday they have accrued but not taken due to sick leave;
• National law can determine whether a worker is entitled to take annual leave during a period of sick leave, but if it does not permit this, the worker must be allowed to take the holiday at a later date, even after the end of the holiday year.
The Stringer case was sent back to the House of Lords for a final determination. However, in light of the ECJ’s decision both parties agreed that the Court of Appeal’s decision should be overturned and the original EAT decision reinstated. The EAT had decided that statutory holiday does accrue, and can be taken, by a worker on long term sick leave. This meant that the House of Lords did not have to go on to consider some of the additional issues raised by the ECJ decision, including the question of whether accrued but untaken holiday can be carried over to a subsequent holiday year.
Decision
The House of Lords only had to rule on the one outstanding issue in the Stringer case: whether or not claims in relation to statutory holiday pay can be brought as a claim for unlawful deductions from wages under the Employment Rights Act 1996 (ERA), or whether they have to be brought under the provisions of the WTR. The importance of this lies in the time limits applicable to each claim. Under the ERA, claimants are required to bring a claim within three months of a deduction, or of the last in a series of deductions. This is more favourable than claims under the WTR, which must be brought within three months of each failure to pay in respect of the worker’s holiday entitlement.
The House of Lords has decided that statutory holiday pay falls within the definition of ‘wages’ and therefore such claims can be brought under the unlawful deduction provisions of the ERA, effectively meaning that claimants who have repeatedly been denied the right to be paid in respect of holiday during sick leave can bring one claim in respect of the series of refusals.
Where does this leave us?
It is very early days for the full impact of this case to be interpreted. However, the following points now appear to be settled law:
• Statutory holiday will continue to accrue during sick leave, even if the worker is not present for the entire holiday year.
• Workers can exercise their right to take holiday (and therefore be paid) during a period of extended sick leave.
• On termination but not during employment, workers have the right to be paid in respect of accrued but untaken holiday entitlement.
• A failure by the employer to allow the worker to either take the leave, or be paid in lieu on termination, can be pursued as a claim for unlawful deduction of wages.
Frustratingly, there still remain a number of areas of uncertainty and in particular we are still not clear about the following crucial issues:
• The WTR do not allow for the carry-over of holiday, so if a worker does not exercise his right to take holiday during a particular holiday year, does he lose the right to be paid in lieu in respect of that holiday on termination in a subsequent holiday year?
• If a worker on sick leave has been refused holiday, can that holiday entitlement be carried over and be taken in a subsequent holiday year or can he only be paid in lieu of the holiday on termination?
Comment
The part of Mr Ainsworth’s original claim that was finally considered by the House of Lords was for a mere £16.14, but obviously the case had much broader implications for employers. However, whilst the long-running saga of the Stringer/Ainsworth line of cases has come to an end, some 10 years after the original tribunal claim we are still not much clearer about some of the key issues.
As to the practical implications of the case, we can now expect to see a flurry of applications for holiday by employees on long term sick leave. It would probably be advisible for employers to pay in respect of requests relating to the current holiday year. There will no doubt be further litigation on the issue of whether such employees will be entitled to claim any entitlement in respect of previous holiday years.
Click here for a copy of the judgment