NHS Leeds v Larner  EWCA Civ 1034
Mrs Larner went on long term sick leave in January 2009 and did not return to work before her employment was terminated in April 2010, meaning that she was on sick leave for the entirety of the 2009/2010 holiday year. Mrs Larner did not use her statutory leave entitlement during the period of her sickness absence and NHS Leeds refused to pay her compensation for the accrued but unused holiday.
Mrs Larner brought a claim against NHS Leeds, seeking payment for the untaken holiday entitlement. Her claims were upheld by the Employment Tribunal and the EAT, before NHS Leeds appealed to the Court of Appeal.
The Court of Appeal found in Mrs Larner’s favour. It followed recent European court cases and held that Article 7 of the Working Time Directive has direct effect against a public sector body such as NHS Leeds. Under Article 7, if a worker is unable or unwilling to take holiday due to their sickness they must be allowed to take that holiday at another time. Neither the Director nor any of the relevant European court decisions require that a worker must have made a prior request to take leave or to carry over untaken leave in order for the worker to be entitled to payment in lieu of that leave. The Court suggested that the UK’s own Working Time Regulations 1998 should be read purposively to comply with Article 7.
This decision at least provides some clarity for employers following conflicting tribunal decisions in the area. Employers must allow workers on long term sick leave to carry over accrued but unused statutory annual leave entitlement where they have been unable to take that leave on account of their being off sick. Furthermore, any compensation for untaken leave paid by the employer on termination must include compensation for leave which the employee was unable to take in the previous holiday year.
To minimise exposure to compensation payments for untaken leave in such circumstances, employers should consider conducting a review of their standard contracts to ensure that only the statutory entitlement (and not any enhanced contractual entitlement) may be carried over in instances of long term sickness absence.