The Court of Appeal has upheld the Employment Appeal Tribunals ruling in NHS Leeds v Larner and decided that employees who do not have the opportunity to take annual holiday entitlement because they are on long-term sick leave are:  

  • entitled to carry their unused holiday forward into the following year; as well as
  • receive a payment in lieu of untaken holiday when their employment terminates.

The Facts

Ms. Larner went on sick leave in 2009 and had not returned to work at the NHS before by April 2010, when she was dismissed on grounds of ill-health. She made no request in the 2009/2010 holiday year to take or carry forward her annual holiday entitlement. Following the termination of her employment, Ms Larner claimed that she was entitled to a payment in lieu if untaken leave during 2009/2010 holiday year. The NHS defended the claim on the basis that, Ms. Larner failed to make the necessary request and further that she had, in their view, had the opportunity to take her leave but had failed to do so.

In the UK, the Working Time Directive (the “Directive”) is implemented through the Working Time Regulations (the “Regulations”). In general, the Regulations and not the Directive applies directly to workers in the UK. An exception to this is for public sector workers – the Directive directly applies to them.

The Regulations do not provide workers with an express right to carry over holiday in cases where they have been unable to take it due to illness. However, the Employment Appeal Tribunal held that following recent European Court of Justice case law, the Directive gives workers are right to carry over leave entitlement without having to make a formal request and that on the termination of employment, workers are entitled to be paid out for the accrued but untaken holiday. The Employment Appeal Tribunal therefore determined that because the Directive applied directly to Ms. Larner, she was entitled to carry over her leave without making a formal request as well as receive a payment in lieu of untaken holiday on the termination of her employment in respect of the 2009/2010 holiday year.

The Court of Appeal however went one step further. It ruled that private sector workers should have the same rights as public sector workers in relation to holiday entitlement while on sick leave, notwithstanding the lack of express wording to this effect in the Regulations. This was on the basis that the Regulations had to be interpreted purposely and, in light of the Directive, public and private sector workers could not be treated differently.

What does this mean for you?

A worker who is sick during a period of booked annual leave is automatically entitled to take the leave at another time.

A worker who is on long-term sick leave for the whole leave year is entitled to carry forward leave if no request for leave has been made. However, in this case, the accrued holiday in question only related to the year prior to the termination of Ms. Larner’s employment. The decision failed to address the following issue: should a worker be paid in lieu of untaken accrued holiday on termination of employment for untaken holiday over the course of his/her employment or whether the right to carry forward annual leave is limited in time. Time will tell…