Holiday entitlement when on sick leave – a guide for employers

The relationship between sickness and holiday is a tricky one, following two recent European Court of Justice (ECJ) decisions (Stringer and Pereda) and now a tribunal ruling that an employee should have been allowed to carry his holiday entitlement into the following year when he was too sick to take it.

Sickness and holiday – what does the legislation say?

Warning!This article was originally published on 24 February 2010 and is not updated.

XpertHR provides up-to-date guidance on paid annual leave, including the latest case law on the relationship between annual leave and sickness absence.

There is no legislation on the relationship between paid holiday and sickness absence. The Working Time Directive requires member states to allow at least four weeks’ paid annual leave. This is implemented in the UK by the Working Time Regulations 1998.

The minimum paid annual holiday used to be four weeks (20 days for someone working a five-day week). This was increased in October 2007 to 4.8 weeks, and then in April 2009 to 5.6 weeks, or 28 days for someone working a five-day week.

The regulations state the basic four-week holiday entitlement cannot be carried over to the next holiday year. By agreement, the additional 1.6 weeks’ holiday can.

What did Stringer say on sickness and annual leave?

In Stringer v HMRC, the ECJ ruled that a period of sickness absence cannot result in workers losing any part of their entitlement to minimum paid holiday. Workers on long-term sick leave accrue statutory holiday and must be paid for it at their normal rate of pay, even if their sickness lasts for the whole of the holiday year.

Member states can have rules providing that the right to paid annual leave extinguishes at the end of the leave year, but workers must have had the opportunity to take their holiday. Therefore, where a worker has been denied the right to take holiday because of sickness, they must be allowed to carry over the entitlement on returning to work.

Unfortunately, when the case returned to the House of Lords, there was no need for it to consider the correct interpretation of the Working Time Regulations in light of the ECJ judgment. However, it seemed that allowing, or requiring, a worker to take paid holiday during a period of sickness would fit most easily with the regulations, as there would be no need to allow carry-over of annual leave into the following leave year.

What did the subsequent ruling in Pereda mean for sickness and holiday?

Stringer was closely followed by another ECJ decision on sickness and holiday, Pereda v Madrid Movilidad SA.

Francisco Vicente Pereda had been allocated a period of holiday but, following an accident at work, he was unable to take most of it. He asked his employer to allocate him another period of holiday to compensate for the missed leave.

When the employer refused, he challenged this decision in the Spanish courts. They referred the case to the ECJ, which held that Pereda’s period of sick leave should not have counted towards his minimum period of four weeks’ paid holiday under the Working Time Directive.

The ECJ ruled that national laws and collective agreements must not prevent a worker who is on sick leave during a period of scheduled holiday from taking the holiday at a later time. The worker must be able to take the holiday at a later time even if this means taking it outside the leave year in which the leave was accrued.

So, although, according to the ECJ decisions, workers can take paid holiday during a period of sickness, if they prefer not to, they must be allowed to take the leave at a later date, even if this means carrying it over into another holiday year.

What does this mean for employers’ sickness and holiday policies?

Public sector employees could argue that article 7 of the Working Time Directive is sufficiently precise to have direct effect, allowing them to rely on the ECJ’s interpretation of the directive. Private sector employees would ordinarily have to rely on the Working Time Regulations 1998.

However, recent developments mean that it may be possible for the Working Time Regulations to be interpreted in line with Pereda, without the need to consider if public sector workers are able to rely on direct effect.

An employment tribunal recently ruled that the Working Time Regulations could be interpreted to give effect to Pereda, meaning that the employer’s refusal to allow the employee to retake in a new leave year a period of holiday affected by a broken ankle was a breach of the regulations (Shah v First West Yorkshire Limited ET/1809311/09).

The tribunal took into account the EAT decision in EBR Attridge Law LLP and another v Coleman (No.2) [2010] IRLR 10 EAT, in which the EAT was willing to read several subsections into the Disability Discrimination Act 1995 so that it complied with the ECJ’s interpretation of another directive. It did this on the basis that this did not go against the overall purpose of the Act.

The employment tribunal in Shah was satisfied that interpreting regulation 13(9) of the regulations (which prohibits carry-over of the minimum four weeks’ paid leave entitlement) in accordance with Pereda was entirely consistent with the underlying thrust of the legislation.

It therefore read into it that the basic four-week statutory leave entitlement can be taken only in the leave year that it falls due, “save where a worker has been prevented by illness from taking a period of holiday leave and returns from sick leave, covering that period of holiday leave, with insufficient time to take that holiday leave within the relevant leave year, in which case, [he or she] must be given the opportunity of taking that holiday in the following leave year”.

While the decision is not binding, it gives an indication of how other tribunals could approach the issue.

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