What is the limit of carrying over holiday for an employee on long term sickness absence?

What happens to holiday when an employee has been on long term sick is something that has been fairly settled law for a while, given the cases of Pereda v Madrid Movilidad [2009] and NHS Leeds v Larner [2012]. 

As a reminder, Pereda established that if workers do not wish to take their holiday during sick leave they should be allowed to take it another time, even if this means carrying it forward to the next leave year.  Larner subsequently amended the Working Time Regulations 1998 ("WTR") to reflect the fact that the first 20 days of statutory holiday derived from the European Working Time Directive ("WTD") and provided for under Regulation 13 of the WTR ("UK Basic Statutory Holiday") should be carried over to subsequent years where a long term sick worker is "unable or unwilling" to take it during sick leave. 

Whether the right to carrying over holiday in these circumstances has a limit, though, has not been decided in the UK courts until now.  The ECJ, in Schultz-Hoff [2009], had already established that leave cannot be carried over indefinitely and decided, on the facts of that case, that a limit of 15 months was not contrary to the principles of the WTD whilst the Attorney General recommended that there should be an 18 month limit.  However, it was not clear what the minimum cut-off period should be in all cases.  The recent case of Plumb v Duncan Print Group Limited [2015] has now provided some welcome clarification.  The EAT has confirmed that the right to carry-over is not unlimited and established, subject to appeal, that the maximum period for which holiday can be carried over is 18 months from the end of the relevant leave year.It has also established that it is not necessary for workers on sick leave to have to demonstrate that because of their sickness they are physically unable to take annual leave in order to carry that annual leave over into a subsequent leave year.

Facts

The Claimant was a printer and following an accident at work was off sick from April 2010 until February 2014 when his employment was terminated.  The Respondent's leave year ran from February to January each year.  In September 2013 the Claimant requested to take all of his accrued holiday from 2010 to that date.  The Respondent agreed to pay accrued annual leave for that holiday year (2013/2014), but refused to carry over and pay for holiday from the previous holiday years (being 2010/2011, 2011/2012 and 2012/2013).  When the Claimant's employment was terminated, he brought a claim for his accrued holiday for the three leave years the Respondent refused to pay.

ET decision

Applying what was decided in Larner the ET said that the key issue in relation to the claim was whether the Claimant was unable or unwilling to request his annual leave due to his medical condition.  The ET found that, based on the facts, the Claimant was able to take his annual leave whilst off sick (his medical condition did not prevent him taking his annual leave) and therefore as he had failed to take it, the annual leave for the three years had not carried over and had lapsed.  As such, the claim was dismissed.

Appeal

The Claimant appealed to the EAT and argued that sick workers do not have to show that their medical condition precludes them from taking their annual leave in order for that leave to then be carried over.  The Claimant also argued that there was no limit in the UK on how far back leave could be carried over.

EAT Decision

The EAT allowed the appeal for annual leave accrued in 2012/2013 holiday year but dismissed the claim for the other two leave years, on the basis that:

• The purpose of statutory annual leave is to ensure the health and safety of workers and annual leave ceases to reflect this purpose once it has passed a certain limit
• The Working Time Directive (Recital 9) expressly provides that account should be taken of ILO principles, which recognise that annual leave must not accrue indefinitely, but must be taken within 18 months of the end of the relevant leave year to which it relates
• The WTD does not require national law to permit unused leave to be carried over indefinitely. At most, it requires workers who are on sick leave to take that accrued leave within 18 months of the end of the relevant leave year if they were unable / unwilling to take it if off whilst on sick leave
• As such, the EAT suggested the following amendment (in bold/italics) to Regulation 13 of the WTR as amended by the principle set down in Larner (in italics)

"Leave to which a worker is entitled under this regulation may be taken in instalments but – a) it may only be taken in the leave year in respect of which it is due, save that it may be taken within 18 months of the end of that year where the worker was unable or unwilling to take it because he is on sick leave and as a consequence did not exercise his right to annual leave."

In respect of the unwillingness to take the leave, the EAT found that this made no difference to the carry over principle for these reasons:

• The EU case of Schultz-Hoff permitted workers to take annual leave during sickness periods, but there is no requirement for them to do so
• Sick leave is intended to allow a worker to recover from their illness, whereas annual leave is to enable workers to enjoy periods of rest and relaxation for health and safety reasons and it would not be consistent to compel a worker to take annual leave, if they do not wish to do so
• In Larner it was clear the worker was not physically able to take the annual leave, therefore the issue of inability to do so was not considered by the Court of Appeal and no principle regarding the worker having to show they were physically unable to take it was set down
• It is not possible to separate an inability to take annual leave and an unwillingness to take annual leave and if the worker does not request to take the accrued leave, the inference is that they do not wish to take the leave and therefore it carries over.

Comment

Given that issues involving holiday pay are ever changing at present, the EAT has granted leave for both parties to appeal its decision to the Court of Appeal and therefore this is not the end of this case.  However, that said, the EAT decision seems well balanced and is helpful for employers who have employees on long term sick who fail to request their leave in the year that it has accrued, but request it at a later date or when termination of the employment occurs.  This case clarifies that, subject to appeal, the employee is limited to claiming / taking the accrued annual leave within 18 months of the end of the leave year to which that carry over relates. Contracts and policies should be reviewed and, where appropriate, amended in line with this. Employers should also consider whether this decision will mean that it may be worth delaying terminating the employment of an employee until after the relevant 18 months has passes so that accrued holiday for an earlier year is no longer payable. It is important to remember that this decision only relates to the UK Basic Statutory Holiday of four weeks (20 days for full time workers) statutory leave. It does not affect the additional 1.6 weeks (8 days for full time workers) or any contractual leave over and above the statutory entitlement. Therefore, it is important to review your contracts and policies to ensure that carry over of annual leave in these circumstances only relates to the UK Basic Statutory Holiday and that the anything over and above this does not carry over in these circumstances.

In May 2011 the government published its Consultation on Modern Workplaces which, in part, considered revisions to the way annual leave is dealt with under the WTR to give effect to case law developments including Pereda and Larner. However, the government has still not published its response to this consultation so it does not seem that the proposals are being taken forward at present and, instead, developments on these issues are being established through case law. 

For more information, please contact the employment team at Foot Anstey.