Holiday pay and sick leave: Ramifications of the Stringer ruling

In January this year, the European Court of Justice (ECJ) decided that a worker on sick leave is also entitled to annual leave, but that member states could have rules that required or enabled the annual leave to be taken during sick leave.

The decision of the House of Lords in Stringer v HMRC (formerly Ainsworth v HMRC) has made it clear that any entitlement to pay in lieu of annual leave is to be treated as a “deduction from wages” and that it is therefore possible for the employee to claim in respect of a “series of deductions” potentially for up to six years (the time limit for contract claims).

The two decisions leave a great deal unclear and we may now see more litigation to try to work out what they mean in practice, unless the government takes Parliamentary time to amend the Working Time Regulations.

Q What limits are there on paid leave that can be carried over after an employee returns from sickness?

A This is a good question and I wish there were a clear answer. Assuming the employee has tried to take their annual leave and have not been able to, then potentially the time limit for claiming could be three months from the last occasion on which they weren’t able to take it, stretching back for six years, because this is a community right, which is akin to a contract right, and therefore the six-year limitation period applies. The types of situations in which this might arise are where an employee has been on periods of long-term sick leave over a number of years, or where the employee has been on long-term disability insurance and therefore on permanent sick leave. Employers are going to have to think carefully about how they manage the situation where it looks as though employees won’t be able to take their annual leave, because of long-term sickness absence. Unfortunately, it is also not clear what happens if the employee has not tried to take the leave in the relevant year where there is no provision for carry over. In those cases, the employee probably loses the right. What is certain is that there will be more litigation.

Q If an employee is made redundant on return from sick leave and has unused leave, what is the employer’s position?

A The employee is entitled to pay in lieu of the unused leave. This can either be the statutory minimum of 28 days per annum or the contractual amount, whichever is the greater.

Q What are the implications of the ruling on mothers who return after one year’s maternity leave?

A The employee accrues annual leave during the whole of her maternity leave so the employer has to find a way of permitting the mother to take the statutory annual leave or to make a payment in lieu.

Q By when should an employee take holiday accrued during the previous year?

A Unless there is a right to carry over, or the employee has requested and been refused the leave, it must be taken within the designated leave year.

Q Can an employee who has not used all their annual leave carry it over into the next leave year?

A No, not unless there is a contractual right to carry over or the employer has refused permission for the employee to take the leave.

Q Can employers require their staff to take annual leave?

A Yes, the employer can serve the employee with notice requiring them to take their annual leave. This means that potentially an employer could serve this notice during or in respect of a period of sick leave, provided this wasn’t a breach of contract.

Q Could employees taking long-term disability benefit or permanent health insurance accrue the right to annual leave?

A Yes. One of the implications of the recent decisions in the ECJ and House of Lords is precisely that employees who are away for years in receipt of permanent health insurance could potentially build up a right to annual leave (and pay in lieu) during those years. It is not clear if the leave is payable by the insurer.

Q Could employees on sabbatical or a career break become entitled to annual leave?

A Potentially – so it would be important for employers to require the employee to take their annual leave during the sabbatical leave or career break.

Sue Ashtiany, head of employment, Nabarro

One Response to Holiday pay and sick leave: Ramifications of the Stringer ruling

  1. W McKenndy 7 Jan 2015 at 2:11 pm #

    How will this affect an employee who is dismissed on medical grounds after a long illness covering more than one year?
    Can the employee claim annual leave not taken in the previous year, as well as the leave due for the current year ?