Holiday Pay and Sickness Absence- the continuing saga

It is clear from a line of cases that the right to holiday still accrues while an employee is off work due to illness. A couple of recent cases help clarify the limits to the accrual of piad holiday entitlement, and the practicalities of taking holiday in these circumstances.

In the case of KHS AG v Schulte the European Court of Justice (ECJ) has ruled that the EU Working Time Directive does not provide the right to unlimited accumulation of annual leave by a worker that has been on long term sickness absence. This will clearly be a relief to employers, who will be able to "mark a line in the sand" on this issue, so that employees that have been off work due to sickness for years will be able to claim the accrued holiday entitlement for the whole period of absence. The case involved a locksmith that sufferd a heart attack in 2002. This left him unable to work. He received an invalidity benefit until his employment was eventually terminated in 2008. The following year he lodged a claim for entitlement to accrued holiday pay for 2006, 2007, and 2008. The court upheld the full claim, and allowed him the entitlement for the years of sickness absence. The employer appealed to the next higher court. The employer succeeded in that appeal in so far as it rejected the claim for payment for 2006, referring to domestic law only permitting 15 months carry-over. The ECJ however ruled that a right to unlimited accumulation of holiday entitlement would not reflect the real purposes of annual leave-which is to provide a break for a period of relaxation and rest for the worker. Beyond a certain period the accumulation no longer actually provides that break. The ECJ held that the carry over period must provide for the worker to have planned, staggered holiday, available over the long term, but the carry over period should also protect employers from the accumulation of holiday leave over a very long period of absence. In this case the ECJ concluded that the 15 months carry over limit was fair and legitimate. as it still allowed for annual leave which retained its positive effect as a rest period.

An important point to note from this case is the fact that the ECJ observed that domestic laws should not impose conditions that would make it difficult for an employee to meet (including an employee on long term sickness absence). However, the case is helpful to employers as it indicates that the entitlement to accrued holiday has its limits, and will not accrue forever.

The second recent case on this issue may to some extent be subject to challenge following the Schulte case. The Employment Appeals Tribunal (EAT) has ruled that an employee still has to give the required notice of intention to take holiday as required under the Working Time Regulations, even if they are on long term sickness absence. The EAT ruled that unless the employee gave that required notice, he cannot take the designated period as a holiday. This case, Fraser v St George's NHS Trust involved an employee that had been off sick for 4 years. The employer did not deny that the employee had accrued the right to holiday pay, but denied the holiday because the employee failed to give the required prior notice of intention to take holiday. This is a practical decision of the EAT, and on the face of it is helpful to employers. However, in view of the decision in Schulte it remains to be seen if this decision will followed. It is also notable that the EAT rejected the argument from the employee in this case that the employer had an implied duty to inform the employee of the right to holiday in a lengthy period of sickness absence. Employers should approach this decision with some caution, but until the issues arise in a higher court, it is likely that the Employment Tribunals may still follow this authority.

If you need further advice or assistance on the issues raised in this case, please do not hesitate to contact Hallett Employment Law Services.