Workers can accrue holiday pay while on sick leave, the House of Lords has ruled.
In the final judgment in Stringer v HMRC this morning, the House of Lords ruled that workers who are denied holiday pay while on sick leave can claim to an employment tribunal for unauthorised deduction from wages under the Employment Rights Act 1996.
The eagerly anticipated ruling follows the European Court of Justice (ECJ) ruling held in January this year, that staff do accrue paid holiday for their entire sick leave, and must be allowed to take it on their return or be paid in lieu of it if their employment ends.
But as the ruling did not comply with the UK's existing Working Time Regulations, which requires employees to use all holiday within a year or lose it, the case was passed to the House of Lords to decide whether the decision by the ECJ applied in the UK.
This morning, the House of Lords confirmed the ECJ ruling did override the Working Time Regulations.
PCS union, which represented the employees concerned in the Stringer case, praised the ruling.
Mark Serwotka, PCS general secretary, said: "This is a victory for common sense. The ECJ confirmed that sick workers cannot be refused paid annual leave if they wish to take it, and nor can employers reduce termination payments on account of sickness. The House of Lords has now made it easier for employees to pursue employers who continue to illegally deny them their rights."
According to PCS, workers will now be able to take advantage of the more generous time limits that apply to unlawful deduction claims. These will allow claims to go back more than three months if the underpayments form part of a series, as opposed to three months under the Working Time Regulations.
However, Martin Warren, head of employment law at Eversheds law firm, warned the decision would prove "highly frustrating" for employers as it meant claims for holiday pay while on sick leave would need to be assessed on a case by case basis.
|Pinsent Masons partner Philip Titchmarsh discusses various aspects of the House of Lords ruling on Stringer v HMRC.|
“Furthermore, it leaves the door open for potentially costly back-dated pay claims from former employees, a particular blow to smaller businesses, many of whom already struggle with the costs associated with long term staff sickness.
"At a time when many businesses are focussing their efforts on surviving one of the deepest recessions on record, many will be concerned that susceptibility to back-dated pay claims could stretch their resources to breaking point,” he said.
HMRC v Stringer concerned former employees of Her Majesty's Revenue and Customs (HMRC), which brought claims against the department after requests for holiday and holiday pay were rejected due to long-term sick leave.
One employee had requested annual leave during a period of sickness absence, which HMRC refused. The others were dismissed following long-term sickness absence, and they claimed payment in lieu for outstanding holiday.
The Court of Appeal had originally held that employees on sick leave did not accrue annual leave during the time they were not working.