In its long awaited decision, the Court of Justice of the European Communities ("ECJ") has found that a worker does not lose his right to paid annual leave despite the fact that he has not actually been at work because of long term sickness.

The ECJ's interpretation of the entitlement to paid annual leave in cases of workers on long term sick leave was requested by the House of Lords in the case of Stringer and Others v HMRC.

Under the Working Time Directive, implemented in the UK by the Working Time Regulations, workers are entitled to a statutory minimum amount of holiday each year (currently 4.8 weeks). There is no entitlement to be paid in lieu for that leave, save where employment has been terminated. There is also no right to carry over leave to the next leave year if it is untaken during the current leave year.

In Stringer, one of the claimants, who was on unpaid sick leave, argued that she should be entitled to take paid holiday instead. In the other cases, employees who had been dismissed following long-term sickness absence contended that they should be entitled to be paid in lieu of untaken annual leave. The Court of Appeal decided in 2005 that if a worker had been on sick leave for the entirety of a leave year they had no right to paid annual leave for that leave year, and consequently they had no right to be paid in lieu for it upon dismissal.

However, the ECJ has now held that a worker does not lose his right to paid annual leave, despite having been off work, sick, for the whole of the annual leave year in question. The ECJ held that it is for the national courts to decide whether or not the paid annual leave can be taken during the annual leave year or if there should be a carry-over period, but either way, the worker is entitled to be paid at some point.

Nor is the right to paid annual leave extinguished at the end of the annual leave year and/or of any carry-over period, if applicable, where the worker has been on sick leave for the whole or part of the leave year in question and was still off work sick when the employment relationship ended. The employee is therefore entitled to be paid for any untaken sick leave upon termination.

Most employers will probably have readily adopted the Court of Appeal's view that the entitlement to paid annual leave did not accrue during periods of sickness absence, so the ECJ's judgment is unlikely to be popular in that quarter. The House of Lords will now give its final judgment in Stringer, but in light of the ECJ judgment, employers should not hold their breath!