Holidays and Sickness Absence

Helen O’Brien writes:

The holiday entitlement provisions of the Working Time Regulations 1998 have probably given rise to more questions and conundrums than any other piece of employment legislation to date.

Here are some common grey areas around sickness absence and holidays:

1. Accrual of annual leave during sickness absence

The question of statutory holiday entitlement for employees who are off sick is a contentious topic for employers. In the past, many employers took the view that there should be no need to grant paid holidays to employees who had been off sick long term. This approach was, however, outlawed in January 2009 when the Court of Justice of the European Union (CJEU) issued its judgment in Stringer v HM Revenue and Customs [2009] IRLR 214. The CJEU ruled as follows:

• Statutory annual holiday continues to accrue during all periods of sickness absence, even where the employee has been absent for the whole holiday year.
• In respect of employees who are off sick long term, employers must permit the employee either to:
  • convert a period of sick leave into paid holiday leave (if the employee agrees to this), or;
  • take all the annual leave accrued whilst off sick after returning to work.
• If, due to sickness, the employee has not had the opportunity to take his or her full holiday entitlement during the current holiday year, the employer must allow the untaken holidays to be carried forward to the next holiday year.
• If the employment is terminated, the employer must make a payment to the employee in lieu of the accrued annual leave.

2. Sickness that prevents an employee from taking holiday

In September 2009, the CJEU made a further important ruling in Pereda v Madrid Movilidad SA [2009] IRLR 959. The CJEU ruled that where an employee falls sick (or is injured) shortly before a period of planned holiday, the employer must permit the employee, on request, to reschedule the holiday to another time once he or she has recovered.

The court did not address whether or to what extent the employer would be entitled in these circumstances to insist that the employee produces medical evidence of the incapacity. It is likely, however, that it would be legitimate for the employer to require a doctor’s certificate or letter (as a condition of allocating replacement holiday leave) to the effect that the illness or injury prevented the employee from taking his or her holiday.

Under s.15 of the Working Time Regulations 1998, employers may, if they wish, require employees to give notice of the dates on which they wish to take statutory annual leave. In NHS Leeds v Larner [2012] IRLR 825, however, the Court of Appeal ruled that there is no need for an employee who is absent due to sickness to submit a request to carry forward statutory annual leave before the end of the relevant holiday year in order to have the right to be paid in lieu for it if the employment is subsequently terminated.

The situation could, however, be different in the case of an employee who, following a period of sickness absence, actually had an opportunity to take the outstanding holiday, but did not do so.

3. Sickness during annual leave

In Asociación Nacional de Grandes Empresas de Distribución (ANGED) v Federación de Asociaciónes Sindicales CJEU [2012] Case C-78/11, the CJEU confirmed that where a worker becomes incapacitated during a period of paid annual leave, he or she will be entitled subsequently to take paid annual leave equivalent to the period of sickness.

Subsequent to the above cases, the CJEU has ruled (in Neidel v Stadt Frankfurt am Main [2012] IRLR 607) that the statutory right for employees who have been unable to take annual leave as a result of sickness to carry forward the unused holiday to the next holiday year is restricted to the four weeks of annual leave prescribed by the EU Working Time Directive.

This means that (unless our Government rules otherwise) employers are free to devise and operate their own contractual rules governing employees’ holiday entitlements beyond the first four weeks as regards how these interact with periods of sickness absence.

The implications of these cases are as follows:

• The right to statutory annual leave cannot be extinguished at the end of a holiday year where an employee has been unable to take his or her full period of holiday entitlement as a result of sickness absence.
• Employers cannot force their employees to use up their statutory annual leave whilst they are off sick.
• Where an employee has been unable to take his or her full period of statutory annual leave because of sickness, the employer must permit carry-over of the first four weeks of the untaken leave to the next holiday year.