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Holiday Pay Carry Over- No need to request leave while absent due to illness

27th August 2012

The Court of Appeal has delivered a judgment that addresses an issue that is of significant practical concern to employers, concerning the arrangments and requirements over taking holiday and carrying over holiday for employees that have been absent due to illness.

In the case in question, NHS Leeds v Larner,the employee Mrs Larner had been absent due to illness from January 2009 until her dismissal in April 2010. She had not requested any holiday during the holiday year 2009/2010, nor did she ask to carry over her holiday entitlement. Early in the next holiday year the employee was dismissed. NHS Leeds refused to pay the employee for her holiday entitlement that she had not taken in 2009/2010.

Mrs Larner subsequently brought a claim in the Employment Tribunal in respect of the untaken holiday entitlement from 2009/2010.The Employment Tribunal held that the Working Time Regulations could be interpreted in accordance with European Court case law to support Mrs Larner's claim. NHS Leeds appealed against the decision of the Employment Tribunal. The Employment Appeals Tribunal (the EAT) rejected the argument from NHS Leeds that Mrs Larner had lost the right to holiday pay as she had not requested holiday in the year 2009/2010. The EAT noted that the European Court case of Pereda v Madrid Movilidad SA demonstrated that a worker that is on sick leave during a period of previously booked holiday has the right to take that holiday at some other time. In applying the priciples of that earlier case, the EAT concluded that Mrs larner di not have the opportunity to take her holiday entitlement in 2009/2010, and was therefore entitled to carry over that entitlement in full to the following holiday year without having to make a request to do so. In turn her right to be paid for that accrued holiday entitlement arose with the termination of her employment.

NHS Leeds also appealed against the decision of the EAT. The case was therefore considered by the Court of Appeal. 

The Court of Appeal carried out a review of the relevant European case law on the subject of holiday leave and pay entitlement. The Court of Appeal noted that Article 7 of the European Working Time Directive (which is the legal basis of the UK's Working Time Regulations) made no mention of  a requirement of a prior request for holiday leave if a worker wishes to carry over leave from one period into the next. The Court therefore concluded that Mrs Larner had been entitled to take her annual leave at any time that she was not sick, including in a future holiday year. The Court concluded that it was not open to NHS Leeds to argue that Mrs Larner had an opportunity to take her annual leave as there was unchallenged evidence that she had been unable to take her holiday as she had been ill throughout the holiday year.The outcome was therefore that on termination  Mrs Larner was entitled to a payment in liue of her holiday entitlement that she had been unable to take in 2009/2010. The Court also stated that, had it been necessary (as in the case of a private employer) to decide the case under the Working Time Regulations, that the Regulations could be interpreted purposefully to give effect to the position under Article 7 of the Working Time Directive (see above).

It should be noted that the Government has already proposed amending the Working Time Regulations to fully reflect the European case law. The Government's proposals have not yet been made. 

From the view of employers this case indicates that they must ensure that full records of long-term sickness absences are recorded, as well as the amount of holiday that has been taken by any effected employee before the sickness period began. Employers should also note that even though absent, even if past the period of entitlement to Statutory Sick Pay, an employee absent due to illness will not lose his/her right to a payment in respect of all the accrued holiday entitlement on the termination of their employment.Appropriate records should be kept by the employer over a number of years to support their calculation of holiday pay entitlements for those that have been absent for a lengthy sickness absence.

At Hallett Employment Law Services we can give advice and guidance to employers and employees on dealing with their rights and responsibilities in dealing with this situation. Do not hesitate to contact us if you require advice on this issue.       

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