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The Holiday Pay Saga Continues For Employers

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The long-running saga of holiday entitlement during sickness absence has taken a step further following a recent decision of the Employment Appeal Tribunal (EAT) in the case of NHS Leeds v Larner.

Keeble HawsonIn this case, the employee was off sick for a period of 14 months before being dismissed on grounds of incapability due to her ill health. Her period of absence spanned an entire holiday year, for which the employer refused to make any payment in lieu of her untaken annual leave on the basis that she had made no formal request to take any leave.

The employee brought a claim for unpaid holiday pay under the Working Time Regulations 1998 (WTR), which was upheld by the employment tribunal. On appeal, the EAT considered the decisions of the European Court of Justice (ECJ) in the cases of Stringer and others v HM Revenue and Customs (2009) and Pereda v Madrid Movilidad SA (2009).

The EAT considered that in light of these cases, the claimant had accrued holiday during her sickness absence but had not had the opportunity to take any leave during the holiday year in question. The EAT therefore decided that her statutory holiday entitlement was carried forward to the following holiday year, without any need for her to have made a formal request to take leave during her absence. This meant that on the termination of her employment, she was entitled to be paid in full for her accrued and untaken holiday entitlement.

Paul Grindley, Head of the Employment team at Yorkshire law firm Keeble Hawson LLP commented:

“The ECJ and House of Lords decisions in Stringer left us with a number of unanswered questions in relation to the accrual and carry forward of statutory holiday during long term sickness absence. One of the issues that remained to be dealt with was whether the employee had to actively request a period of holiday, in order to be entitled to carry it forward to a subsequent holiday year (if the employer refused that request). The EAT has now ruled that it is not necessary for the employee to make any such request in order for the holiday entitlement to be capable of being carried forward.”

“This is bad news for employers, who may face a large payout on termination in relation to individuals who have been off sick for extended periods. However, this decision relates to a public sector employer (NHS) against whom ECJ decisions can be directly enforced.”

“It is less certain at this stage whether private sector employers would need to comply with this decision, although there has been a first instance decision involving a private sector employer in which an employment tribunal has decided that the WTR could be interpreted in light of the ECJ rulings.”

“The Government has been consulting on proposed amendments to the WTR in order to take account of the various ECJ decisions relating to sickness absence and statutory holiday. The consultation closed on 8 August 2011 and the Government’s response is likely to be issued at some point in the autumn, with implementation of the amendments likely to take effect during 2012.”

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