News

The European Court of Justice ("ECJ") has ruled that workers who are absent due to sickness continue to accrue paid annual leave.

Implications

Employers do not need to take any action now because the House of Lords still has to apply the ECJ ruling to English law.

However, the House of Lords are likely to decide that employees and workers are either entitled to take paid annual leave during any period of sickness absence or to carry it over to the next leave year and to hold that employees and workers who have been off sick for all or part of a holiday year are entitled to be paid their accrued annual leave on termination of their employment. The House of Lords will therefore have to overturn the Court of Appeal's decision in HMRC v Ainsworth which held that employees who are on sick leave neither accrue annual leave or are entitled to take paid annual leave.

Details

The ECJ in the case of Stringer v HM Revenue and Customs (HMRC) was considering two referrals: one from the German Courts and one from the House of Lords. The German referral concerned an employee who, due to long term sick leave, retired and wished to claim his annual leave for the previous year. The UK case (Stringer v HMRC previously known as HMRC v Ainsworth) concerned an employee who was on long term sick leave and requested that part of it be taken as annual leave.

The ECJ ruled that an employee or worker who is on sick leave for the whole of an annual leave year does not lose their right to accrue paid annual leave and therefore is entitled to paid annual leave, despite the fact that they are not actually at work. However, the ECJ held that it will be for the national courts to decide whether the paid leave can be taken during that holiday year, or whether it should be carried over to the next holiday year, but either way the employee is entitled to be paid at some point.

Furthermore, the ECJ held that where an employee or worker is on sick leave for the whole or part of their holiday year and is still on sick leave when his employment terminates, they are entitled to be paid in lieu of their accrued but untaken annual leave.

This case has now been referred back to the House of Lords to apply the ECJ's decision. Therefore, expect another newsflash on this topic when the House of Lords has given its ruling.