An employee’s entitlement to holiday, and the pay he or she receives while taking holiday, has been a hot topic in the courts over the past few years.

In the case of Plumb v Duncan Print Group Ltd, the Employment Appeal Tribunal (“EAT”) has returned to the topic of an employee’s entitlement to holiday while on sick leave.

In 2009, the European Court of Justice (“ECJ”) in the cases of Stringer and Others v HM Revenue & Customs and Pereda v Madrid Movilidad established the following principles:

  • Workers who are off work on sick leave continue to accrue annual leave
  • Workers can take holiday during sick leave, however if they are unable or do not wish to do so, they can take it at a different time, even if this means carrying it over to the next holiday year

These decisions were all made under the EC Working Time Directive (“Directive”). However, they conflict with regulation 13(9) of the Working Time Regulations 1998 (“WTR”) which implements the Directive in the UK. Specifically, this provides that statutory annual leave must be taken in the same year in which it is accrued and cannot be carried over into the following leave year.

The Court of Appeal in the case of NHS v Larner found that it was possible to interpret regulation 13(9) WTR in line with ECJ case law. It suggested that regulation 13(9) WTR should be read including the words in bold below:

“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 where the worker was unable or unwilling to take it because he was on sick leave and as a consequence did not exercise his right to annual leave“.

Is the right to carry over holiday unlimited?

However, the question still remained whether there was a limitation on the period for which an employee could carry forward annual leave.

In the case of KHS AG v Schulte, the ECJ held that, under the Directive, there is a limit to the length of time an employee on long-term sick leave can continue to carry over untaken annual leave. In this case, the employer’s collective agreement provided that annual leave not taken within 15 months of the end of the relevant leave year because of sickness would be lost.

The ECJ held that this did not infringe the Directive. The ECJ noted that there does come a time where, if annual leave was carried over indefinitely, it ceases to meet one of its purposes, which is to have a positive effect for the worker as a rest period. The ECJ held that the carryover period should be significantly longer than the leave year and in this case 15 months was sufficient (although it did not make clear whether this should be a minimum cut off period).

This issue has now been raised in the EAT in the case of Plumb v Duncan Print Group Ltd.

What happened in this case?

Mr Plumb was absent on sick leave from April 2010 until his employment terminated in February 2014. Mr Plumb did not take paid annual leave for the 2010, 2011 and 2012 leave years. While on sick leave, in September 2013, Mr Plumb made a request to take all his accrued annual leave from 2010. While the employer agreed to pay salary for holiday for the 2013/2014 leave year, it refused to pay for the previous three leave years. On termination of his employment, Mr Plumb sought payment in lieu for the 2010, 2011 and 2012 leave years.

What did the EAT decide?

In looking at ECJ case law, the EAT agreed that EU law does not confer an unlimited right to carry over annual leave. It decided that the Directive required, at most, that employees on sick leave should be able to take holiday within a period of 18 months of the end of the leave year in respect of which the annual leave arose.

As a result, the EAT suggested regulation 13(9) of the WTR be amended (see bold and underlined, see italics for what was added in the NHS v Larner case):

“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 was on sick leave and as a consequence did not exercise his right to annual leave.

Mr Plumb was therefore entitled to payment in lieu of annual leave for the 2012/2013 leave year but no earlier.

The EAT also decided that sick workers do not need to demonstrate that they were physically unable to take holiday while absent on sick leave. The mere fact that they are off sick and not taking any holiday will be sufficient to entitle the employee to carry over statutory holiday.

What does this mean for employers?

Given the importance of these issues, the EAT has given the parties leave to appeal to the Court of Appeal.

On the whole this is a good decision for employers as the EAT has effectively limited the ability of employees on long-term sick leave to accrue and carry forward untaken annual leave.

However, this decision only applies to the four weeks’ annual leave under the Directive and not the additional 1.6 weeks under the WTR, or any contractual holiday entitlement over and above this. Employers therefore need to assess whether they wish to operate a different policy for entitlement to annual leave over and above the four weeks under the Directive, for example, to require that employees must use such leave in the holiday year in which it has accrued.