Case of the week: Entitlement to paid annual leave during sick leave

Stringer v Her Majesty’s Revenue & Customs

FACTS This case involved two groups of workers employed by Her Majesty’s Revenue & Customs (HMRC). The first group was absent on sick leave for a period of several months. During that time, they gave notice that they wished to take annual leave. The request was refused, and they therefore issued a claim arguing that they were entitled to take paid annual leave during their sick leave.

The second group of workers were absent on sick leave for the entire leave year, and they were then dismissed by HMRC. They brought proceedings claiming a payment in lieu of their untaken annual leave.

DECISION The employment tribunals and the EAT upheld the workers’ claims. HMRC appealed to the Court of Appeal which found in its favour, holding that:

  • A worker cannot take annual leave while they are on sick leave
  • If a worker has no entitlement to annual leave because they have been on sick leave, then they are not entitled to a payment in lieu on termination.

The employees appealed to the House of Lords, who decided to refer the following questions to the ECJ:

  • Does the Working Time Directive mean that a worker on indefinite sick leave is entitled (i) to designate a future period as paid annual leave, and (ii) to take paid annual leave, in either case, during a period which would otherwise be sick leave?
  • If a member state exercises its discretion to replace the minimum period of paid annual leave with an allowance (in lieu on termination), in circumstances in which the worker has been absent on sick leave for all or part of the leave year in which the employment is terminated, does the directive impose any requirements as to whether the allowance is to be paid? And how it is to be calculated?

The Advocate General gave her opinion on 24 January 2008. She stated that a worker on indefinite sick leave is entitled to designate a future period as paid annual leave during a period that would otherwise be sick leave. However, annual leave cannot actually be taken while the worker remains on sick leave.

In relation to the second question, the Advocate General stated that the entitlement to leave must be replaced by a payment in lieu on termination of employment, even where complete incapacity for work occurs during the leave year.

IMPLICATIONS The Advocate General’s opinion is not binding on employers, and it may not be followed by the ECJ when it comes to give its judgment. Traditionally, however, the ECJ has agreed with the Advocate General’s opinion. It may, therefore, be risky for employers to continue to rely on the Court of Appeal judgment and fail to make a payment in lieu of annual leave where employment terminates part-way through (or at the end of) a leave year during which the employee has been absent on long-term sick leave. If the ECJ agrees with the Advocate General, it will not be a defence for the employer to argue that it was simply relying on current UK case law.

Employers may, however, be on safer ground when refusing to allow staff to take annual leave during a period of sick leave, assuming the ECJ follows this part of the Advocate General’s opinion.

Alan Chalmers, partner, DLA Piper

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