Workers who fall sick during annual leave should be allowed to take their holidays again even if it means allowing the days off to be carried over to the following year, the European Court of Justice (ECJ) has ruled.
Previously, workers who were ill while on holiday had no argument for claiming annual leave entitlement back.
But now the European Court has said workers are entitled to reschedule annual leave under the Working Time Directive (WTR).
The ruling follows a House of Lord's judgment in Stringer V HMRC earlier this year, which ruled workers can accrue holiday pay while on sick leave.
The ECJ ruling goes some way towards answering whether someone who does not take their leave entitlement because of illness can carry that leave forward to a subsequent leave year - an outstanding question resulting from the Stringer case.
While the answer is still unclear and awaits clarification from either case law or the UK government, Eversheds law firm warned employers to prepare for annual leave to be allowed to be carried over to the next year.
"Employers that don't allow leave to be carried forward risk a tribunal finding that they have breached the WTR," an Eversheds employment briefing said.
It added: "The mandate on sickness and holidays means that workers who are on sick leave have a choice. They can take annual leave if they wish, but if they would prefer not to do so they can insist on postponing their annual leave and taking it at a later date. This may include a subsequent leave year if it is not possible to arrange leave before the current year ends."
However, Owen Warnock, a partner at Eversheds, said there were still many grey areas.
He said: "The danger of abuse is clear: an employee could increase his or her holiday entitlement by ensuring that in most years they alleged they were sick while on holiday. It may only be the occasional "bad penny" employee who does this, but the resentment that it would create with colleagues should not be underestimated.
"Until the European or UK courts say otherwise, our view is that employers are entitled to require workers to produce convincing evidence of their illness while on holiday and that it would have rendered them unfit for work before allowing workers to reallocate holidays."