Two of the outstanding issues around holidays accruing during sickness absence have been addressed by the European Court in the German case of Neidel v Stadt Frankfurt am Main.  The case was brought by an employee who claimed pay in lieu of holiday that had accrued during two years' sickness absence immediately prior to his retirement. 

The ECJ has confirmed:

  • entitlement to pay in lieu of untaken holiday on termination of employment extends only to the minimum four weeks of leave guaranteed by the European Working Time Directive and not to additional entitlements under national law
  • as decided at the end of last year by the ECJ in KHS AG v Schulte, national laws can prevent holiday that accrues but is not used as a result of illness from being carried forward indefinitely, but the carry-over period must be substantially longer than the reference period in respect of which the leave is granted.  In Schulte the ECJ decided that limiting the carry-forward period to 15 months from the end of the relevant leave year was acceptable; here the Court says that a nine month carry-over period is too short.

The outcome of this case is likely to strengthen the Government's preference, expressed in the Modern Workplaces consultation exercise, to amend the provisions of the Working Time Regulations to limit carry-over to four weeks' annual leave.  However, their proposal to allow employers to insist that leave unused because of sickness is taken in the current leave year (in other words, presumably, with a 12 month carry-over) may need a re-think in the light of the "substantially longer" comment.