Case of the month: Stringer and others v Her Majesty’s Revenue and Customs

Can workers take annual leave during a period of sickness absence?

Stringer and others vHer Majesty’s Revenue and Customs

Court of Appeal *****

The claimants were all previously employees of Her Majesty’s Revenue and Customs (HMRC). One had requested to take annual leave during a period of sickness absence, which HMRC refused. The others were dismissed following long-term sickness absence, and they claimed payment in lieu for outstanding holiday.

They all brought claims under the Working Time Regulations 1998 (WTR), which implements the EC Working Time Directive (Directive). Although successful in the employment tribunal and Employment Appeals Tribunal, the employees lost in the Court of Appeal.

They appealed to the House of Lords, who asked the European Court of Justice (ECJ) in December 2006 to consider two questions. The first was whether the directive entitles a worker on sick leave to accrue annual leave while absent and/or to take that annual leave while absent. The second question was whether an absent worker is entitled to a payment in lieu of untaken annual leave upon termination of employment.

The Advocate General has now delivered her opinion on these questions. This opinion is not legally binding, but the ECJ normally follows the recommendations of the Advocate General.

The Advocate General’s Opinion

The Advocate General disagreed in part with the Court of Appeal, and said that the right to paid annual leave arises from the very first day of employment and continues to accrue during a period of sickness absence. Paid annual leave is a fundamental social right, and to exclude workers on sick leave would apply a condition to that right that prevents certain workers from enjoying it.

The Advocate General explained that one form of leave guaranteed by community law should not affect another. Sick leave had a specific purpose: to recover from an illness the causes of which were outside the worker’s control. Annual leave, on the other hand, is meant to allow rest. So, while workers may want to take annual leave at the same time as sick leave – given that annual leave is often paid better – the two are mutually exclusive, and must not be taken together.

On the second question, the Advocate General concluded that the entitlement to take paid leave during employment, and the right to receive a payment in lieu on termination, were inseparable. The entitlement includes payment in lieu of holiday accrued during a period of sickness absence, but not yet taken, as this allows employees to take their “rest” before starting a new job.

The ECJ’s decision is expected later this year. If it follows the Advocate General’s opinion, the House of Lords will be bound to overturn the Court of Appeal’s decision, so that UK workers will be entitled to accrue holiday on sick leave. Further, workers will be entitled to a payment in lieu of holiday on termination. This is likely to inflate termination costs, particularly where the employee has been off sick for an extended period.

The WTR do not currently permit accrued but untaken holiday to be carried over from one year to the next. However, the Advocate General’s opinion appears to imply that this should be allowed, and she has recently confirmed the same on a reference from a German court on the same point.

Key points

  • The Advocate General’s opinion is that although the entitlement to paid annual leave under the Working Time Directive continues to accrue during sickness absence, the worker cannot actually take holiday during such absence. On termination of employment, staff are entitled to compensation for accrued but untaken annual leave.
  • This is not a legally binding decision, so we will have to wait for the ECJ’s decision for the final word.

What you should do

  • Err on the side of caution – particularly on termination of employment – until the legal position is confirmed. The Stringer case relates solely to statutory minimum holiday entitlement under the WTR, which is currently 4.8 weeks per year including public holidays, and is due to rise to 5.6 weeks in April 2009. You are therefore free to specify that leave in excess of this amount does not accrue on sick leave, and is not paid out in lieu on termination. If you wish to do this, you should review your holiday policies and contracts of employment to ensure that this is made clear.

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