Annual leave should be carried over to next year when staff fall sick

Employers should change their sick leave policies to allow annual leave to be carried forward into the next year, or risk a tribunal finding they have breached regulations, according to employment lawyers.

The warning follows two European Court of Justice (ECJ) cases ruling that in some circumstances, holiday entitlement should be allowed to be taken in the next annual leave year, despite the UK Working Time Regulations (WTR) specifying it is unlawful to carry over more than eight days per year.

Last week, in the case Pereda v Madrid Movilidad SA, the ECJ ruled that workers who fall sick while on holiday should be allowed to reschedule their leave, even it if meant within the next leave year. And earlier this year another case, Stringer v HMRC, ruled workers can accrue holiday pay while on sick leave, and that holiday should be allowed to be carried forward.

But the WTR specify that no more than eight days can be carried forward into the next leave year, leaving a ‘grey area’ in the law until UK case law clarifies the situation.

Nicola Johnston, employment lawyer at Pinsent Masons, says that until the UK’s legislation is changed we could see a 2 tier system with public sector employees enjoying better holiday rights than those in the private sector. She also discusses the need for employers to review their policies and procedures.

David Beswick, employment partner at law firm Eversheds, told Personnel Today: “Employers wishing to follow best practice should change their policies to allow leave to be carried forward due to illness to the next annual leave year. In April this year, the WTR were amended to state that no more than eight days could be carried forward. Now employers should prepare for carrying over more than eight days.”

However, Beswick stressed that in reality, the majority of employers will wait for case law before rushing to change their policies. “Employers that choose not to amend their policies need to be aware there is a risk factor that they could be breaching regulations and may end up at tribunal. But sometimes it’s not always best to change all policies now when you might get away with it for another year or two.”

The government has refused to shed any light on whether it will amend the WTR to allow up to 28 days’ annual leave to be carried over to the next year. When asked whether the Department for Business, Innovation and Skills was considering changing the law or awaiting case law, a spokesman said: “We are examining the terms of the judgment and will consider issuing further guidance in due course.”

Beswick added that employers were entitled to ask staff to produce a doctor’s note for proof of illness. “There will be a few malingerers trying to beat the system, so employers can require a doctor’s note,” he said.

However, Beachcroft law firm warned that allowing workers who fall ill while on annual leave to retake those holiday days at a later date will be a “costly blow”.

Employment lawyer Alex Lock said: “Sickness absence already costs British business billions of pounds each year, with the average worker absent for around 10 days. This judgment, allowing workers to carry over holiday days where they coincide with illness, will add further to this cost.

“In addition, businesses will face an increased administrative burden in keeping track of accumulated annual leave for employees on long-term sickness absence. This is likely to lead to employers taking a tougher line with employees, demanding much stronger evidence of their illness and being less prepared to tolerate long-term absence.”

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