The Court of Appeal has upheld the EAT’s decision in NHS Leeds v Larner that a worker who was absent due to sickness for a whole leave year was entitled to payment for that year’s unused statutory holiday entitlement when her employment terminated.

Mrs Larner was off sick from January 2009 until her dismissal in April 2010 on grounds of capability. On termination, NHS Leeds refused to pay her in respect of holiday accrued but not taken for the 2009/10 holiday year, arguing that she had not asked to take any of her annual leave, nor requested to carry it forward into the following leave year.

Taking into account the recent string of European cases on this issue, the Court of Appeal rejected the employer’s argument. Mrs Larner had a right to take at a later date the holiday she could not take whilst sick. She was also under no legal obligation to request annual leave whilst off sick, or to request to carry it forward to another leave year. Therefore, on termination of her employment, she was entitled to payment in lieu of her untaken holiday.

We are still awaiting confirmation from the Government of the detailed amendments to the Working Time Regulations to take account of judicial decisions in this area. One reason for this may be the delayed negotiations at European level on changes to the Working Time Directive. Issues to be clarified include the limit on how long employees on sick leave can carry over untaken holiday, and whether the right to carry over holiday applies to the extra 1.6 weeks’ leave provided by the UK Working Time Regulations (on top of the four weeks’ leave provided by the EU Working Time Directive). In the meantime, employers are advised to ensure that their sickness and holiday policies are as robust as possible, in order to limit potentially large claims by sick employees for accrued but untaken holiday.