Legal opinion: Holidays and long-term sickness absence ruling still leaves questions unanswered

In NHS Leeds v Larner [2012], the Court of Appeal has held that a worker who was unable to take four weeks’ annual leave due to sickness did not have to make a request to carry it over into the next holiday year for her to receive a payment in lieu on termination of employment. Hayley Johnson, solicitor, looks at the decision and the unanswered questions that remain.

It has previously been open to employers to argue that leave has to be requested before the employee can argue that it has been deemed to be carried over; the Employment Appeal Tribunal decision of Fraser v South West London St George’s Mental Health Trust [2012] confirmed this.

For public-sector employers, the Larner decision confirms that in relation (at least) to the four weeks’ leave offered by the Working Time Directive, if employees are off sick and do not take all of this leave, any untaken days will have to be carried over into the next holiday year and paid for when they leave (whether or not they requested to take it at the time).

While the picture remains less clear for private-sector employers, the door appears to be closing on legal arguments that can be used to try to save employers the cost of implementing the European Court of Justice’s decisions in Stringer and Pereda, which indicated that employees on sick leave continue to accrue holiday and can take it while off (but are not required to do so) or carry it over to the next leave year. In Larner, the Court of Appeal confirmed that the UK’s Working Time Regulations 1998 could be read in the light of these decisions. With comments like this made by the Court of Appeal, it will be difficult to try to distinguish the private sector from the public sector on this issue.

Carrying over leave

The only point that remains clearly in employers’ favour in this area is that the case law has confirmed that leave may not be carried over an indefinite number of leave years (the ECJ’s decision in KHS AG v Schulte [2012]). This should mean that employees who are off sick for two years or more, for example those who are members of insurance-backed sick pay schemes, cannot carry leave over all the years of their absence. As yet, the area of insured sick pay schemes remains untested here.

Grey areas that remain include:

1. How the Government will amend the Working Time Regulations to comply with the Directive. It made its initial proposals in the Modern Workplaces consultation in May 2011, however, a response following the close of this consultation is still awaited.
   
2. To what extent the UK’s additional 1.6 weeks’ leave can be treated differently to the four weeks’ leave offered by the Directive. The Government’s consultation suggested that carry-over will be allowed only up to a maximum of four weeks rather than the full 5.6 weeks provided by UK law.
   
3. While we know that carry-over is not indefinite (Schulte), it remains unclear how much time has to pass before an employee loses their right to take (and be paid for) leave. It would be helpful if the Government could suggest a period when it confirms how it is going to amend the Regulations.

The cases in this area have been plentiful. They have exemplified the extent to which the judiciary is prepared to stretch the interpretation of current legislation when it appears to contradict an applicable EU Directive. Much of the drama could have been avoided if the Government had clarified how the Regulations would be amended earlier. Let’s hope, for the sake of employers waiting to amend their sickness absence policies, that the Government’s clarification of how the Regulations will be amended will now be forthcoming.

Hayley Johnson is a senior solicitor in the employment team of Brodies LLP.

The XpertHR Tribunal Watch blog rounds up the key decisions on holiday and sickness absence.