The House of Lords has finally given its ruling on the long-running case of HM Revenue and Customs v Stringer and others. The case concerned five Inland Revenue employees who had brought various claims under the Working Time Regulations 1998 (the 'WTR') for holiday pay, even though they had been on long term sick leave and had exhausted their entitlement to contractual and statutory sick pay.

The main substantive issue in this case was whether workers who are absent on sick leave still accrue annual leave (under the WTR) and whether such leave should be carried over to the following leave year if the worker has not had the opportunity to take holiday while on sick leave. This issue was referred to the ECJ which gave its ruling in January 2009 (see Bitesize February 2009 edition). Having gone back to the House of Lords, there are unfortunately still a number of questions outstanding. The key principles that have now emerged are:

  • Workers on long term sick leave continue to accrue holiday even though their sick pay has been exhausted.
  • Where a worker is unable or does not have the opportunity to take annual leave they will be entitled to carry it over into a subsequent holiday year. The House of Lords has not given guidance as to what "unable" means.
  • An employee can bring a claim for holiday pay as an unlawful deduction from wages claim within three months of the last in a series of deductions. Such claims are not limited to the previous holiday year and can therefore span back a number of years. Claims under the WTR are limited to the previous holiday year and so this is a significant change for employers.
  • If an employer refuses the employee the right to take holiday while on sick leave, the employee is likely to have a claim. If the employer has refused the right for a number of years this claim can build up to the point where the employer has a large bank of unpaid holidays.

There are a number of unanswered questions following the House of Lords decision:

  • It is unclear whether a worker must have actually sought to have taken the holiday in order to be owed holiday pay. It is unclear whether a worker who is on sick leave and has not requested any holiday is entitled to holiday pay. There is conflicting case law on this point.
  • It is clear that upon termination of employment, a worker can now bring an unlawful deduction from wages claim for unpaid holiday accrued during sickness absence. It is not clear, however, if a worker is still in employment whether they can bring such a claim. The WTR strictly prohibit payment in lieu of holiday except on termination of employment.
  • There is little clarity as to whether the outcome of this case extends to contractual sick pay or is limited to statutory.

There is clearly scope for much more litigation in this area, we will keep you informed!

Unfortunately, this case may actually have a negative impact on a number of employees as employers are more likely now to dismiss those on long-term sick leave in order to avoid the cost of paying holiday pay. The incentive to introduce PHI schemes is also diminished.

HM Revenue and Customs v Stringer and others.