The European Court of Justice recently held in Pereda v Madrid Movilidad SA that under the Working Time Directive:
- A worker who becomes ill during a period of statutory annual leave has the right to reschedule that leave at another time; and
- The normal rule preventing carry over of statutory holiday into the next holiday year should not apply. If the replacement leave cannot be taken in the same holiday year, carry over should be permitted.
The decision has been widely publicised and employers can expect employees to be aware of the decision and to request replacement holiday if their holiday is ruined by sickness.
Until now, a handful of employers voluntarily operated schemes that allowed employees to take further holiday if they were to become ill during planned holiday. For everyone else, it was just bad luck and there was no entitlement to replacement leave.
The effect of this decision is clear for public sector employees. They have a right to reschedule this leave. They can take a period equivalent to the period of the holiday for which they were actually sick (not the whole holiday). The employer can direct the time at which that replacement leave may be taken. If business interests prevent the employee from taking that leave within the same holiday year, the employee must be permitted to take it in the next holiday year.
The position is less straightforward for private sector employees, whose statutory annual leave entitlements are governed by the Working Time Regulations 1998. Only public sector employees can rely directly on a European Directive. Everyone else has to rely on the national legislation that implements the directive. The Regulations may need to be amended as they are inconsistent with the Directive. For now, however, the Regulations do not appear to allow rescheduling of holiday or carry over. Whilst the courts and tribunals have to be guided by the Pereda decision when interpreting the Regulations, they cannot replace or rewrite them.
Further areas of uncertainty at present are:
- Whether the new right applies only to the 4 weeks' per year set out in the Directive, or the 5.6 weeks per year under the Regulations; and
- What evidence of sickness the worker can be required to provide.
Until the Regulations are amended and/or the tribunals give decisions on the matter, private sector employers have the following main options:
- Stick to their existing absence policies and await further clarification in the form of legislation or case law. With this approach employers need to bear in mind that they may find themselves party to one of the first cases if an employee sues! Settlement may be possible, but this approach carries a degree of risk.
- Keep sickness policies as they are, but deal with instances of holiday sickness on a case by case basis as, if and when employees raise them. This keeps profile low, so as not to encourage some employees to take advantage of the issue. If, however, cases are not dealt with consistently there is scope for allegations of discrimination. By allowing replacement holiday in one case an employer may be creating an expectation in another case. Of course, for cases where replacement holiday is denied, the risks remain as for the above option.
- Amend sickness policies to allow replacement holiday. This reduces the risk of employment tribunal claims and enables employers to set out clear rules for managing the arrangements. It may, however, result in an increase in absences (every day of sickness on holiday means two days away from the workplace) and an increase in cost (particularly where employers offer enhanced sick pay in excess of SSP).
Many employers' sickness policies may be due an update in any event following another recent decision of the European Court of Justice, Stringer and others v HM Revenue and Customs, which confirmed that workers on long term sick leave accrue statutory annual leave, and have the right to be paid for it even if the sickness lasts more than a year.
For employers that wish to adopt a sickness policy that reflects the Pereda decision on replacement holiday we offer the following practical points:
- Reserve the right to direct the time at which the worker may take the replacement leave;
- Consider whether you want to extend the replacement holiday to enhanced contractual holiday, or limit it to statutory holiday. If the latter, make the distinction clear.
- Make it clear that the days of sickness whilst on holiday will be treated and recorded as sickness absence instead of holiday, will be paid as sick leave and will be deducted from any annual allowance for paid sick leave.
- Consider whether enhanced sick pay will be paid during sickness on holiday, or whether only SSP will be paid. If only SSP is payable, it is less attractive for workers to seek replacement holiday. For short periods of illness they would not receive any pay at all.
- Think about the sickness reporting arrangements that you will require. The policy is obviously open to abuse and employers will be tempted to impose more stringent evidential requirements and reporting procedures. Obtaining a medical certificate could, however, be difficult, costly or downright impossible to obtain, particularly in remote holiday destinations. Calling in at the time of sickness could also be tricky. Requiring photographic evidence could lead to interesting results!
- Make it clear that, to qualify, the sickness must be of a nature that would prevent the worker from doing his or her job. However much an injury messes up an active holiday, if that injury would not prevent the person carrying on with his usual desk job, the right to replacement holiday does not arise.
- If you are concerned about workers abusing the policy, consider your record keeping arrangements, which should enable you to spot those who have the misfortune to fall ill on every holiday. The policy can also state that abuse of the policy could lead to disciplinary action.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
