In Pereda v Madrid Movilidad SA, the European Court of Justice ("ECJ") has decided that where a worker is sick during a period of pre-planned annual leave, annual leave must be granted to him for a different period and if he is prevented from taking it during the current holiday year, he can carry it forward to the next one. This judgment follows on from the recent and highly publicised conjoined cases of Schultz-Hoff and Stringer, which established that a worker on sick leave accrues annual leave whilst off sick but it is for Member States to decide whether a worker can take their annual leave during a period of sick leave. The upshot of these decisions appears to be that employees can choose to do what suits them best – if on long term sick leave, they can elect to take paid annual leave, but if they are sick whilst on paid annual leave, they can elect to postpone paid annual leave and take it later even if that means having to postpone it to the next holiday year. Pereda represents a very worrying development for employers as it opens the door to abuse because unscrupulous employees will be able to re-classify parts of their holiday as sick leave on their word alone.

What happened in this case?

Mr Pereda worked as a specialist driver for Madrid Movilidad SA, a firm responsible for removing wrongly parked cars from public highways in Spain. Mr Pereda had been allocated a period of leave from 16 July to 14 August 2007 in accordance with his employer’s staff leave schedule for that year. A few weeks before he was due to take his leave, he had an accident at work and was unfit for work until 13 August 2007 with a result that during his allocated period of annual leave he was simultaneously on sick leave until the final 2 days. In September, he asked his employer if he could take his annual leave from 15 November to 15 December in the same year on the grounds that he had been on sick leave during the period of annual leave originally allocated to him. His employer rejected that request without giving any reasons and Mr Pereda brought a claim in the local Spanish court. The Court was unsure about the correct interpretation of Article 7 of the European Directive 2003/88 on working time, including in particular annual leave, and so asked the ECJ to give guidance.

Article 7 provides that Member States should ensure that every worker is entitled to at least 4 weeks paid annual leave and that this minimum period of paid annual leave cannot be replaced by an allowance in lieu except where the employment is terminated. The Spanish Court asked the ECJ to determine whether Article 7 allows a worker in the circumstances of this case, to postpone his leave, even where this means having to carry forward annual leave into the next holiday year.

The ECJ decision

The ECJ said that the entitlement to paid annual leave under Article 7 must be regarded as a particularly important principle of community social law, from which there can be no derogation. The ECJ confirmed that although national law may lay down conditions for the exercise of the right to paid annual leave, including the loss of that right at the end of the leave or a carry over period, this must be subject to the condition that the worker must have had the opportunity to exercise that right (this principle was established in the recent cases of Schultz-Hoff and Stringer).

As regards the issue in the present case, the ECJ said that a worker must normally be entitled to actual rest for health and safety reasons during his annual leave. The purpose of paid annual leave is to enable the worker to rest and to enjoy a period of relaxation and leisure. The purpose of entitlement to sick leave is different; it is given to the worker so that he can recover from being ill. It follows from this that a worker who is on sick leave during a period of previously scheduled annual leave has the right, on his request and in order that he may actually use his annual leave, to take that leave during a period which does not coincide with the period of sick leave. The ECJ said the right to reschedule the leave must be subject to the rules and procedures of national law and the interests of the various parties involved, and if for these reasons the worker is unable to take a new period of annual leave, the employer is obliged to grant the worker a different period of annual leave which is compatible with those interests, even if that this means that the annual leave may have to be carried forward into the next holiday year.

What this decision means for employers

EU law provides that workers are entitled to at least 4 weeks paid annual leave. This right is conferred in the UK by the Working Time Regulations 1998 ("WTRegs") which entitle workers to 5.6 weeks’ paid holiday per year (ie 1.6 weeks more that the basic EU right under Article 7). The WTRegs specifically provide that this leave must be taken in the current holiday year, so cannot be carried forward to the next. The ECJ in Pereda has now made it clear that statutory leave can be carried forward in certain cases. It is not clear whether this right applies to the minimum 4 weeks as provided by EU law or whether it would extend to the full 5.6 weeks under the WTRegs. It is likely to be the latter, but this will no doubt be considered by the UK Courts in the future.

Some employers allow their workers to reschedule their annual leave if they fall sick whilst on holiday. However, the WTRegs do not give workers a right to do this. Reg 15 WTRegs gives an employer the right to require a worker to take annual leave on a certain date. It does not give a worker the right to refuse, cancel or rearrange that leave – that can only be done by mutual agreement. Pereda concerned a worker who fell sick prior to going on holiday. It is therefore arguable that Pereda is not authority for the proposition that employees who fall sick during their annual holiday are entitled to extra days off in lieu. That said, in our opinion it is difficult to see why the same rationale cannot be applied to such cases. One further point is that given that the ECJ has said that a worker might be able to choose his leave in these circumstances, this case now raises doubts as to whether a worker who is on long term sick leave can be forced by the employer to take his statutory annual leave at the same time (thus saving the employer money on sick pay in some cases).

Public sector workers will immediately be able to benefit from the ruling in Pereda because of the doctrine of "direct effect" which allows them to enforce EU law directly in the UK courts. It will not be as easy for private sector workers since they are unable to enforce EU rights directly in a tribunal. Their option is either to wait until the WTRegs are amended or ask an Employment Tribunal to interpret the WTRegs so as to take account of the purpose behind the EU law (this is known as "indirect effect"). If the Tribunal is unable to do this (as seems likely), the WTRegs will prevail as they stand.