Employees on long-term sick leave will not be allowed to accrue holiday pay while they are absent, following a landmark decision at the Court of Appeal.
In Commissioners of Inland Revenue v Ainsworth, the court ruled that regulations allowing staff paid holiday were only applicable to people who were actually at work.
The 1998 Working Time Regulations (WTR) give workers the statutory right to four weeks paid holiday.
The Court of Appeal ruling overturns the controversial 2002 decision in Kigass Aero Components v Brown at the Employment Appeal Tribunal, which said employees were entitled to be paid their holiday entitlement even if they had been off sick all year.
Chris Davis, employment lawyer at law firm Halliwell’s, said employers will now need to make changes to their holiday and sickness policies, as claims for any accrued holiday will now be affected by attendance records.
However, he warned that care will be needed when putting this new statement of the law into practice, as contracts of employment which offer greater rights for employees would supersede the ruling.
Davis also warned that there was scope for discrimination claims if employees could show their particular circumstances led to less favourable treatment. This could lead to claims on grounds of disability, religion and additional maternity leave, he said.
The court also overturned a ruling which had allowed applicants to claim backdated holiday pay going back two years – List Design Group v Douglas – and said that claims for non-payment of annual leave must be brought under the WTR regime.
Julie Quinn, a partner at law firm Allen & Overy, said: “This is more good news for employers because it means claims for non-payment of holiday pay cannot be backdated further than one year.”