In NHS Leeds v Larner, the Court of Appeal has now delivered its judgment that workers who have been absent on sick leave for an entire leave year remain entitled to pay in respect of that year’s unused statutory holidays on termination of their employment, and the fact that the worker may have failed to request that the holidays be carried over to a subsequent leave year does not affect the right to payment.  

Whilst the Working Time Regulations 1998 (“WTR”) in the UK prohibit carry-over of holidays from one leave year into the next, it has become clear from European case law over recent years that workers who have been unable to take leave due to sickness absence should be allowed to carry it forward to a subsequent year.  A question subject to conflicting decisions of the Employment Appeal Tribunal last year was, however, whether or not the worker on sick leave must make a request to carry forward the unused leave at the end of the leave year, or if it was carried forwardautomatically.

Mrs Larner was a clerical worker for NHS Leeds absent on sick leave from January 2009 until her employment was terminated in April 2010.  She brought a claim seeking payment of her statutory holiday entitlement for 2009.  NHS Leeds argued that as no holiday requests were made during the period, nor any requests made to carry the leave over into the subsequent holiday year, she lost the rights to the annual leave. Mrs Larner was successful with her claim in both the Employment Tribunal and the EAT, each confirming no request for carry over was necessary.  Meanwhile, however, the EAT held in a different case last year that a request for carry over was necessary.

The Court of Appeal has now addressed this conflict and dismissed NHS Leeds’ appeal, confirming that there is no legal requirement established by relevant legislation or case law that employees on sick leave must take positive action to carry annual leave forward from one holiday year to the next.  

Impact for employers

  • Where workers are prevented from taking their statutory annual leave as a result of being on sick leave, they must be afforded the opportunity of taking this at a later date.  This decision has clarified that this rule involves allowing those employees to carry forward that leave into a subsequent holiday year, regardless of whether the employee has formally requested for this to happen or not.  The Court of Appeal has made it clear that a ‘use it or lose it’ style approach should not apply to workers on sick leave.
  • Employers considering dismissing employees on long term sick leave should be aware that holidays accrued in previous leave years due to sickness absence may be retained by the employee, if they have not used them throughout their sickness absence, and that this will have a financial impact for the employer on termination.