The Employment Appeal Tribunal (“EAT”) has held in Plumb v Duncan Print Group Ltd that a worker absent on sick leave is entitled to be paid in lieu of accrued unused annual leave when their employment is terminated and they should not be required to prove their inability to take the holiday due to their medical condition.

However, and very importantly, annual leave cannot be carried over indefinitely – it can only be carried over for up to 18 months from the end of the leave year in which it accrues.

Mr Plumb (“P”) worked as a printer. Due to a work-related injury, P was on sick leave from April 2010 until February 2014, when his employment was terminated. On termination of his employment, P requested payment for all his accrued annual leave dating back to 2010. The employer only agreed to pay him for the annual leave accrued in the current leave year 2013/14, following which P brought a claim for payment in lieu of all his accrued annual leave between 2010 and 2013.

The Employment Tribunal (“ET”) dismissed P’s claim. The ET applied NHS Leeds v Larner, which added wording into Regulation 13(9) of the Working Time Regulations (“the Regulation”) to the effect that an employee could carry over unused annual leave only if they were “unable or unwilling to take it” due to being on sick leave. The ET therefore held that P had to prove his medical condition meant he was unable to take holiday. As P continued to work a different job at the weekends and because he had no medical documents to prove he was medically unable, his claim failed.

Two main points were raised in the appeal. First, whether it was sufficient for a sick employee simply to choose not to take  holiday, as opposed to being medically unable, and secondly, whether there was a limitation on how many years’ worth of untaken annual leave a sick employee could claim.  The second point was particularly relevant to employers.

On the first point the EAT held that Larner had been misapplied and that an employee has the option to take annual leave during a period of sick leave, but is not obliged to do so.

On the second point, the EAT  interpreted the Regulation in light of the underlying purpose of the EU Working Time Directive, and held that annual leave does not accrue indefinitely. The EAT held that accrued annual leave will expire after 18 months from the end of the leave year in which it accrued, and wording to that effect should be incorporated into the Regulation. As a result, P could claim  for the untaken annual leave in 2012/13 and 2013/14, but not the earlier years.

In light of this case, it is worth employers noting that employees should be permitted to carry over untaken annual leave accruing when they are on sick leave even if they would have been able to take this annual leave had they chosen to do so. Further, this case provides employers with  a degree of certainty  regarding how much annual leave an employee can carry over. Employers might wish to check their employees’ employment contracts and ensure that carry-over is permitted but note  it need not exceed 18 months.

However, this may not be the last word. The EAT has granted both parties leave to appeal to the Court of Appeal, so  we will follow the outcome of that, if either of both parties appeal.