One of the main features of the coalition Government's consultation document on modern workplaces, which was published on 16 May 2011 and also proposes significant changes to the current system of maternity and paternity leave, is in relation to the annual leave provisions of the Working Time Regulations 1998.
Since the Regulations were implemented in the UK in 1998, giving effect to the European Working Time Directive, it is fair to say that they have caused a fair amount of trouble. Introduced under the banner of health and safety provisions, rather than employment provisions, the approach taken in the statutory instrument to prioritise the safety and wellbeing of employees has not been easy to embrace within the existing structure of UK employment law.
The Regulations regulate a number of areas of the relationship between employer and employee (or, more strictly speaking, "worker"). The most often addressed is that of annual leave. Until 1998, there was no statutory requirement for an employer to allow its workforce to take time away from work, let alone for that time to be paid. Initially, the Regulations provided only for a minimum entitled to four weeks' paid annual leave (under reg.13) but in 2009, a new reg.13A was introduced to increase the annual minimum entitlement to 5.6 weeks.
However, the holiday provisions in the Regulations are far from simple in their implementation, and have been complicated further by a series of cases (including the European Court of Justice rulings in Stringer and Others v Her Majesty's Revenue and Customs and Pereda v Madrid Movilidad SA) in the area of accrual of holiday, and payment in lieu of holiday, during extended periods of absence from work, such as long term sick leave and maternity leave.
A summary of the main principles established by those recent cases is as follows:
- workers continue to accrue leave entitlements during sickness absence;
- workers can elect to take annual leave at the same time as being absent through sickness;
- workers whose employment terminates when they have been off sick are entitled to payment in lieu of accrued but untaken holiday in the same way as other employees;
- workers who fall sick during scheduled annual leave may reschedule the annual leave within the same holiday year;
- workers who are not able to use annual leave during a holiday year due to being off sick must be able to carry that leave over to the next year.
The current Regulations implemented in the UK reflect some of these points but do not allow the carry over of the holiday provided for in reg.13 from one year to the next. The 1.6 weeks' reg.13A holiday can be carried over only where provided for in a relevant agreement.
What the Government is proposing, with the intention of clarifying the application of the Regulations and providing certainty to employers and workers, is the amendment of the Regulations to disapply the prohibition on carrying over in certain circumstances. This is limited, in the proposals, to where an employee has not taken that leave as he or she has been unable to due to sickness absence (including the situation whereby an employee falls ill during a period of pre-booked leave), or absence on maternity, paternity, adoption or parental leave. The caveat to this is that, if there is sufficient time left in the holiday year, an employer may insist that the leave in question is taken before the end of that year.
The situation is to be further complicated as the Government is proposing to limit the application of the carry-over rights above to reg.13 leave (the four weeks), not reg.13A leave (the additional 1.6 weeks introduced in 2009). However, this relates only to absence due to sickness, not to family leave. For example, if an employee takes three weeks' leave in a year, but is then off sick for the rest of the year and unable to take any further leave, he or she will be able to carry over only one week (the balance of the reg.13 leave) and not the additional 1.6 weeks that he or she has lost. However, if an employee takes three weeks' leave and is then absent due to maternity leave, she will be able to carry over the full 2.6 weeks' outstanding entitlement.
As the consultation paper acknowledges, such a system is going to work only if there is clear understanding between employers and workers as to what the rights and entitlements are in each situation, and the provisions should be clearly detailed in a contract or other collective agreement. However, it is perhaps doubtful that writing this down is going to make the legal position any clearer or any simpler to administer.
Esther Smith, partner, Thomas Eggar LLP