As regular readers of our updates will be aware, there has recently been a tide of court judgments upholding the rights of long-term absentees to receive holiday pay under the Working Time Regulations, whether during or on termination of employment. Employers will therefore welcome a new decision of the Employment Appeal Tribunal (EAT) which provides that such employees may only be entitled to receive paid annual leave if they actually apply for holidays whilst they remain off sick.
The EAT held that employees who wish to be paid for their holiday leave whilst off sick must give proper notice of their intention to take that holiday during the year in question. Therefore, the employee on sick leave is in no different position from any other employee who has not exercised their right to paid annual leave in a given year.
The President of the EAT, Mr Justice Underhill, considered that his decision was compatible with the important European Court of Justice (ECJ) decision in Pereda in which the ECJ determined that a worker who was sick during a period of previously scheduled statutory holiday leave had the right to reschedule that holiday for a later date. The EAT concluded that nothing in Pereda was inconsistent with the UK rule that places the onus firmly on the employee to notify their employer of their intention to take annual leave. Further, there was found to be no implied contractual duty on employers to inform staff of their right to request statutory holiday leave whilst absent on long term sickness.
This case contrasts sharply with the case we reported in a previous update, in which a different division of the EAT found that an employee who had been unable to take a previous year’s annual leave due to sickness was entitled to payment for that previous year’s annual leave upon termination of employment. European law was applied to arrive at this decision, which appeared to conflict with the rule in UK Working Time Regulations that payment in lieu of holidays was only possible on termination of employment and only in respect of the current holiday year.
We would suggest, however, that on a careful reading of both of the above cases they are not necessarily impossible to reconcile with each other. The first EAT decision decided that accrued holiday pay for previous holiday years would be payable where the employee’s illness made them unable to enjoy the benefit of annual holidays. This is in line with the Pereda judgment. However, the second EAT decision was made on the basis that there was no evidence that the particular employee involved would have been unable to enjoy the benefit of annual holidays.
Both cases are being appealed to the Court of Appeal, so readers should expect further developments in this fast-changing area of law. Whilst a decisive judgment one way or the other from the Court of Appeal would be desirable, it remains possible that whether or not an employee will be entitled to accrued holiday pay from previous years’ sickness absence will depend on the nature of the illness. The question may be whether or not the particular type of illness deprived the employee of the opportunity to enjoy the rest and recreation normally associated with annual leave.
Just Employment Law will keep you updated on this important issue and will be pleased to advise you on finding the right strategy for dealing with this issue meantime.