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EMPLOYMENT UPDATE

Annual Leave Entitlement and Sickness – Can an Employee Carry Forward ?

• The law on annual leave is contained in the Working Time Regulations 1998, as amended (“the WTR”), which came into force on 1 October 1998 implementing the European ‘Working Time Directive’.
• The WTR entitle workers to a minimum amount of paid annual leave. From 1 April 2009 the entitlement is to a total of 5.6 weeks’ annual leave, made up of 4 weeks’ ‘standard’ annual leave plus a further 1.6 weeks’ ‘additional’ leave.
• The WTR also provide that a worker’s entitlement to the standard 4 weeks’ annual leave may only be taken in the leave year in which it accrues, and cannot be carried forward to the next leave year.

However, workers off sick are probably exempt from this ban on carrying forward, as the cases below show.

Until recently it was understood that a worker on long-term sick leave cannot claim holiday pay. However, in the 2009 case of Schultz-Hoff v Deutsche Rentenversicherung Bund; Stringer and ors v HM Revenue and Customs the European Court confirmed that workers who are off sick for all or part of the leave year are entitled to paid annual leave.

In the further 2009 case of Pereda v Madrid Movilidad SA the European Court considered matters the other way round, and held that a worker who falls sick whilst on annual leave has the right to take sick leave instead, and to take the lost annual leave at a different time.

It therefore appears that the WTR do not adequately implement the Working Time Directive, and in the recent case of Shah v First West Yorkshire Ltd an English Employment Tribunal interpreted the WTR in line with the above cases and held that a worker is entitled to carry statutory annual leave into the following year.

The facts of this case were not unusual. Mr Shah booked four weeks’ annual leave, but broke his ankle shortly before the holiday began, resulting in over three months of sickness absence, including the holiday period. By the time Mr Shah returned to work the leave year during which his holiday had been booked had ended and a new leave year had begun.

When Mr Shah sought to reclaim his holiday, his employer refused stating that this related to the previous holiday year and had been lost. The Employment Tribunal, however, upheld Mr Shah’s claim for loss of holiday under the WTR.

Although Shah v First West Yorkshire Ltd is only an Employment Tribunal level decision, and is not binding on other tribunals or Courts, in view of the European authorities above, we would suggest that you think carefully before stopping any employees on sick leave from taking their statutory annual leave when they return to work, even though you would be right given the way the WTR currently stand.

This article by Alison Lythgoe, Employment Solicitor at Parrott & Coales LLP, gives an overview of this potentially complex subject. For advice on a specific issue, please contact Alison on 01296 318503.