The EAT has held that where employees are absent on long term sickness, unless agreed otherwise, only the minimum 20 day holiday period required by the Working Time Directive may be carried over into the next holiday year, not the additional 8 days holiday under the Working Time Regulations 1998.
The Working Time Regulations 1998 ("WTR") provide for a minimum annual holiday entitlement of 28 days ( 5.6 weeks) for full-time employees. This comprises a minimum 20 day period which EU member states are required to implement under the Working Time Directive, and an additional 8 days which the UK chose to implement with effect from 1 April 2009.
The WTR provide that the minimum 20 day holiday period must be taken in the holiday year in which it is due, i.e. it may not be carried over, and it may not be replaced with a payment in lieu except on termination, (Regulation 13(9)).
The additional 8 days may be carried forward to the next holiday year, but only where provided for in a "relevant agreement", (being an employment contract, (or other legally enforceable agreement with an employee), a collective agreement or workforce agreement), (Regulation 13A).
In NHS Leeds -v -Larner  the Court of Appeal held that in cases of long term sickness, it was possible to interpret the WTR consistently with the Directive so as to permit the carry over of the minimum 20 day entitlement into the next holiday year, and that an employee did not have to specifically request holiday in order to do so. However, the Court of Appeal did not decide whether the additional 8 days must be treated in the same way.
Sood Enterprises -v -Healey
Mr Healey was absent from work on account of sickness for a period of some 11 months, which straddled 2 holiday years: He was entitled to the statutory 28 days holiday per holiday year.
When he resigned whilst still off sick, he received no holiday pay either for that part of his holiday which had accrued in the holiday year in which his employment terminated, or in respect of accrued but untaken holiday in the holiday year before. He brought claims under both Regulations 13 and 13A of the WTR.
The Employment Tribunal ordered full payment in lieu (pro rated) in respect of both holiday years. The employer appealed.
The EAT agreed with the Tribunal that Mr Healey had a right to the full 28 days, (paid on a pro rata basis), in respect of the year in which his employment terminated, but held that, in the absence of a relevant agreement, he was only entitled to carry over 20 days from the holiday year immediately before.
The EAT relied on the ECJ's judgment in Neidel -v -Stadt Frankfurt am Main , where the ECJ held that member states could provide for a period of holiday over and above the minimum period required by the Working Time Directive, and could choose to attach such conditions as they saw fit to the taking of that holiday.
This is the first appellate authority on this point and is likely to be welcomed by employers.
Notably, however, the EAT did not refer to the ECJ's judgment in Land Brandenburg -v -Sass . In Sass, the ECJ held that maternity leave under domestic law, which exceeded the minimum under the Pregnant Workers Directive, must nonetheless be treated in the same way given that both periods of leave promoted the same objective. It has been argued that the same principle applied to the different periods of holiday under the WTR.
The government has already indicated that when the WTR are amended so as to reflect ECJ decisions on holidays and sickness, its intention is to limit the statutory re-scheduling/carry over of holiday to the minimum 20 days required by the Directive, not the additional 8 days. The Sood judgment will no doubt encourage the government in that approach. We are still waiting for the government's full response to this issue, however, which was part of the consultation on "Modern Workplaces" which closed in August 2011.