All this comes about from the European Court of Justice's (ECJ) decision in Pereda v Madrid Movilidad, the flip side of the Stringer/Schultz-Hoff questions; namely, what is the position where a worker's pre-arranged annual holiday leave coincides with a period of sick leave?

In this case, Mr Pereda had scheduled annual leave for the period of 16 July to 14 August. However, following an accident at work on 3 July he was unable to return to work until 13 August. His employer refused his request to designate a future period for annual leave. The ECJ considered whether Mr Pereda did have the option to designate an alternative period for the exercise of his right to annual holiday?

The ECJ said yes. A worker who does not wish to take holiday leave when sick, must be granted their holiday leave for a different period, if necessary carried forward into a subsequent leave year. Accordingly, Mr Pereda was entitled to reschedule his annual leave for the corresponding duration of the overlap between his scheduled annual leave and his sick leave, being 16 July to 12 August.

That is not however the end of the story. It appears from the ruling that a worker is not only entitled to postpone holiday because of sickness as in the case of Mr Pereda, but also where the worker falls ill while absent on annual leave. In those circumstances the worker must be allowed to reschedule their annual leave on return to work.

The Pereda decision also clarifies an outstanding issue raised by Stringer/Schultz-Hoff decision: can an employer require an employee to take their annual leave during sick leave? The rationale behind that arrangement was that an employer might choose to direct that annual leave was taken at the same time as a period of paid sick leave rendering the position cost neutral as far as the employer was concerned. Following the Perada decision it is now clear that a worker cannot be required to take annual leave on sick leave.

Although it remains open for a worker to ask to take annual leave during a period of sick leave, if the worker chooses not to do so then annual leave must be granted for a different period. Therefore, a worker on sick leave for several years will simply be able to store up annual leave entitlement which they must then be able to take when eventually returning to work or, if employment is terminated, be paid in lieu of that holiday entitlement.

It now appears clear that the provisions of the Working Time Directive have not been implemented by the UK's Working Time Regulations 1998. In particular Regulation 13 expressly prevents the carry over of the first four weeks of statutory working time leave into a subsequent leave year and regulation 13A only gives an option to the employer rather than a right to the worker to carry over annual leave. The regulations clearly need to be amended to provide for the right to carry over where the worker has not had the opportunity nor wished to take annual leave during sick leave.

Afterword

Also, by way of update, the Employment Appeal Tribunal has recently heard another challenge to regulation 13. In Lyons v Mitie Security Ltd, the EAT has been asked to consider a case where the company policy required one month's notice of annual leave requests. Three weeks before the end of the leave year, the employee (who had not been off ill), requested his remaining statutory annual leave. The employer rejected the request on grounds that the employee failed to give the requisite notice and the contract provided that any holiday entitlement not taken in the relevant holiday year would be forfeited. An employment tribunal dismissed the employee's claim under the WTR, but on appeal to the EAT, was argued that the employer was legally obliged to ensure that the employee actually took his statutory holiday within the relevant leave year, or to permit him to take the leave despite the short notice. We are currently awaiting the EAT's judgment to be handed down.

As ever we will continue to monitor what is becoming an increasingly complex area.

Wragge & Co's employment experts provide some action points for employers to consider.