The European Court of Justice ("ECJ") has ruled in the case of Stringer and ors v HMRC concerning entitlement to accrue paid annual leave during long-term sick leave.

By way of background, this case (previously under the name Inland Revenue Commissioners v Ainsworth) concerned long-term sick employees, who had exhausted their entitlement to sick pay and who brought tribunal claims seeking to establish that their entitlement to paid holiday under the Working Time Regulations endured even when they were not attending work. 

On appeal, the Court of Appeal held that workers on long-term sick leave had no legal right to take paid annual leave while absent from work.  This meant that employers could refuse a request from a worker on sick leave to convert a period of sick leave into paid holiday leave (in the absence of contractual right to the contrary).  Further, workers on sick leave throughout an entire holiday year had no right to holiday leave or holiday pay in that year. 

However, the claimants appealed to the House of Lords, who remitted the issue to the ECJ.  The ECJ heard the case together with the German case of Schultz-Hoff v Deutsche Rentenversicherung Bund which concerned the related issue of whether holiday untaken owing to sickness absence can be carried forward to the next holiday year or beyond any carry-over period provided for under national legislation.

The ECJ has ruled that:

  • National legislation and practices may preclude workers from taking paid holiday during a period of sickness absence, but a worker must be allowed to take it at a later date;
  • Annual leave continues to accrue during sickness absence and the right to paid annual leave may not be extinguished at the end of the leave year and/or carry over period laid down by national law, even where the worker has been on sick leave for the whole or part of the leave year.  This suggests that workers returning from sickness absence in a new holiday year would be entitled to take holiday accrued but untaken during a period of sick leave;
  • On termination of employment, a worker is entitled to be paid in lieu of any untaken holiday, to be calculated based on "normal remuneration" defined as "that which must be maintained during the rest period corresponding to the paid annual leave".

The case will now return to the House of Lords for a ruling, in light of the ECJ's judgment and the Working Time Regulations 1998 are likely to be amended, since they currently prohibit the carrying over of statutory holiday entitlement.

This decision will clearly have cost implications for employers, who are likely to face claims for holiday accrued but untaken during periods of sick leave and increased costs on termination for employees who do not return to work. 

Employers should therefore ensure that sickness absence is managed robustly and they may wish to consider amending contracts and policies to ensure that they provide that contractual leave over and above the statutory minimum does not accrue during sick leave and will not be paid in lieu on termination of employment.

Disclaimer

The material contained in this article is of the nature of general comment only and does not give advice on any particular matter. Recipients should not act on the basis of the information in this e-update without taking appropriate professional advice upon their own particular circumstances.

© MacRoberts 2009