An Employment Tribunal rules that the employer's payment of holiday pay for 2009 extinguished the employee's claim for unpaid holiday pay for 2008.

Facts:

In 2007 Martin McColl took over the business in which Mr Khan worked and his employment transferred to them. At the time Martin McColl agreed that no worker would lose holiday as a result of the transfer and workers were allowed to carry their 2007 holiday forward to 2008. Therefore Mr Khan's holiday entitlement for 2008 was 6 weeks. However Mr Khan never took or requested to take any of that holiday during 2008. Mr Khan went off sick in May 2008 and subsequently resigned due to ill health on the 14th August 2009.

When Mr Khan's employment terminated Martin McColl paid him for all accrued holiday for 2009 up to the date of his resignation. Mr Khan brought an unlawful deduction from wages claim and a claim under the Working Time Regulations seeking payment for his 2008 holiday entitlement.

Employment Tribunal Decision:

The Employment Tribunal dismissed his claim. The Tribunal acknowledged that the House of Lord's ruling in HM Revenue and Customs v Stringer means that non-payment of accrued holiday pay over several years can constitute a series of deductions for the purposes of an unlawful deduction from wages claim. However it held that as Martin McColl had paid the 2009 accrued holiday pay, the 2008 holiday pay claim was out of time. As there was no right to carry forward the 2008 holiday entitlement to 2009, the right to take that holiday ended on the 31st December 2008. Accordingly any unlawful deduction from wages claim for the 2008 holiday entitlement had to be brought before the 31st March 2009 (i.e. when Mr Khan was still employed and off sick). The Employment Tribunal acknowledged that in effect a 'perfectly good claim' could be defeated by an employer simply paying the most recent amount of holiday pay.

The Employment Tribunal then went on to hold that in any event Mr Khan was not entitled to holiday pay for 2008 because he had never requested it. The European Court of Justice in Stringer had ruled that only workers on sick leave who are 'denied' their holiday are entitled to carry it forward. As Mr Khan had never requested to take his 2008 holiday, he had not been 'denied' the opportunity to take that holiday. Therefore he was not entitled to it.

Conclusion:

As this is only an Employment Tribunal decision it is not binding on other Employment Tribunals who could reach a different conclusion in a similar case. What this case demonstrates is that where an employee's claim for accrued holiday pay stretches back several years their unlawful deduction from wages claim could be defeated by paying the accrued holiday owed for the current or most holiday year, as this will 'break' the series of deductions.

However the Tribunal's conclusion regarding Mr Khan's entitlement to the 2008 holiday pay is less helpful for employers due to two previous decisions by the Employment Appeal Tribunal (EAT). In one case the EAT held that in order to claim holiday pay whilst off sick an employee must request it. Another EAT held that workers who are off sick do not need to formally request holiday in order to be entitled to it under the Working Time Regulations. This means it is not clear which approach Tribunals will adopt. Therefore employers need to make a judgement on how they will deal with this issue. A cautious approach would be to designate a period of sickness absence as holiday and pay the employee for it. Employers who want to take a robust (but potentially more risky) approach can insist that only employees who formally request holiday whilst off sick are entitled to it.