UK News

Carrying forward holiday entitlement accrued while on sick leave

October 2011

The Employment Appeal Tribunal recently held that employees who accrue holidays during a period of sick leave will carry forward any untaken holiday entitlement to future holiday years automatically.  It is not necessary for them to have formally notified an intention to take holiday.

The facts of the case

An employee had been on sick leave for more than an entire holiday year.  Her employer subsequently terminated her employment.  On the termination of her employment the employee claimed holiday pay for her untaken holiday which had accrued during the holiday year she was on sick leave.

The employer claimed that the employee had forfeited her holiday entitlement as she failed to give notice in accordance with the Working Time Regulations 1998 (the “Regulations”).

This claim was rejected by the Employment Tribunal but allowed by the EAT on appeal.  The EAT held that the holiday entitlement could be carried over to the next year and the fact that she had not given notification did not affect her rights to the accrued holiday.

The question which remains is for how long can this continue? In Ms this case the issue came to a head because employment was terminated but that leaves open the situation where the employee continues in employment.

The Advocate General’s opinion

In another recent case (Pereda v Madrid Movillidad), the Advocate General of the European Court gave an opinion on the relationship between the long term sick leave of a German employee and holiday rights under the Working Time Directive (the “Directive”).

The Advocate General said that under EU law an employee is not entitled to accumulate rights to paid holiday indefinitely and a national law which provided for employees to lose their holiday entitlement after a period of 18 months following the end of the relevant holiday year was probably acceptable under the Directive.

UK Consultation on changes to the Regulations

The UK government has recently consulted on workplace issues and proposed that up to 4 weeks of holiday, accrued while the employee was on long term sick leave, could be carried forward to the next holiday year.

Once the results of this consultation are finalised we shall publish an update.

Commentary

Pending legislation in this area, employers will need to factor in untaken holiday entitlement for those on long term sick leave. This will effectively crystallise on dismissal and will require a payment in lieu. What is less clear is whether a returning employee in those circumstances is entitled to take the carried over holiday as well as that for the current year – a total of as much as 40 days, at least until the Government’s proposals are finalised.  On the basis of the Pereda case (above) employers could stipulate that accrued holiday pay will be lost in any event after the expiry of 18 months from the end of the holiday year although, as cases of this nature should be relatively rare, it may be safer to deal with each on a case by case basis.

For further information or to discuss the issues raised, please contact David Widdowson or Stephen Wright on +44 20 3051 5711.