In Adams and another v Harwich International Port Ltd, an employment tribunal held that sick workers may carry over their statutory annual leave entitlement until the next leave year (but not necessarily beyond) if unable or unwilling to take it due to sickness or if so required by the employer. Importantly, the right was said to apply to the full 5.6 weeks' leave (made up of the four weeks required by the Working Time Directive, and the additional 1.6 weeks' leave provided for by regulation 13A of the Working Time Regulations 1998). This is despite incompatibility with Regulation 13(9) of the Working Time Regulations which expressly prevents carry-over.

In KHS AG v Winfried Schulte, the Court of Justice of the European Union considered the length of time that leave may be carried over for the benefit of sick workers. It was noted that allowing workers to accumulate unlimited amounts of holiday or pay in lieu of holiday does not accurately reflect the purpose of Article 7 of the Working Time Directive; statutory leave should safeguard the welfare and health of employees via a legitimate rest from work rather than provide mere relaxation and pleasure. Any carry over period must be substantially longer than the reference period for the holiday year in respect of which it is granted, must allow workers to stagger their rest periods and plan them in advance, and must also protect the employer from the possibility of a worker accruing lengthy periods of absence. The Court stressed that the entitlement to paid holiday was of primary importance and should not be undermined by imposing demanding conditions upon it.

This is in contrast with the Employment Appeals Tribunal's ruling in Fraser v South West London St George's Mental Health Trust, where it was held by the President of the EAT that the employee (who had been on long term sick leave for almost three years) was obliged to notify her employer of the fact that she wished to exercise and carry over her accrued holiday in order to prevent the right from expiring. It was considered to be counter-productive to make payment for holiday days which had not technically been taken (i.e. no notice had been given) as this would result in double payment and may be construed as an incentive not to take holiday. Although this leaves the issue less than certain, it suggests that a sick worker must request to carry over holiday rather than assume that this will occur automatically. It is worth noting that NHS Leeds v Larner proceeded on the assumption that losing the right to holiday meant that the corresponding right to holiday pay was also lost. This issue is expected to be dealt with in greater detail when it is heard by the Court of Appeal in the near future.

What this means for employers

Whilst statutory annual leave cannot be carried over indefinitely, employers should note that workers unable to take their statutory annual leave entitlement due to sickness may carry it over to the next year and employers should not impose conditions which prevent this.

Adams and another v Harwich International Port Ltd ET/1503084/10 and 1503085/10

KHS AG v Winfried Schulte [2011] EUECJ C-214/10

Fraser v South West London St George's Mental Health Trust UKEAT/0456/10

NHS Leeds v Larner [2011] IRLR 894

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