In Shah v First West Yorkshire Limited, an employment tribunal has applied the recent decision of the European Court of Justice in Pereda v Madrid Movilidad SA on the complex issue of the effect of sick leave on annual leave.

Mr Shah's leave year ran from 1 April to 31 March. He booked four weeks' holiday beginning 22 February 2009 and ending 21 March 2009. Prior to this, in January 2009, Mr Shah broke his ankle. He went on sick leave and did not return until 18 April. During his sickness absence, he received both contractual sick pay and, for the period that he would have been on annual leave, holiday pay in addition.

Whilst off sick, Mr Shah wrote to his employer and asked that this pre-planned holiday be reclassified as sick leave to allow him to take that holiday on his return to work. First West Yorkshire Ltd refused this request. The reason for their decision was that Mr Shah was not allowed to carry over untaken holiday entitlement into a new leave year. Because he had returned to work after the new leave year had begun, the holiday entitlement had been lost.

The tribunal upheld Mr Shah's subsequent claim. It considered that it was obliged to interpret the Working Time Regulations 1998 ("WTR") in line with EU law and therefore applied the decision in the Pereda case (which was on similar facts) that a worker who falls ill prior to a period of pre-planned leave is entitled to take that leave at a later date. That is true even where that means that the annual leave will need to be carried over into the next leave year. Under the WTR, annual leave can only be taken in the year in which it accrues. To get around this, however, the tribunal simply read additional wording into the WTR to give effect to the Pereda decision.

Impact on employers

This is the first case directly on this issue. Although it is not binding on other tribunals, it gives an indication of the approach tribunals may take when the question arises.

Guidance published on the Department for Business, Innovation and Skills ("BIS") website along with a case note on the Pereda and Stringer cases, goes even further than this. It suggests that the right to reclassify and carry over annual leave also applies where the worker becomes sick whilst on annual leave and not only where that illness begins beforehand. In our view, this goes further than the ECJ in the Pereda case.

Employers can seek to limit the impact of this by:

  • •requiring medical certificates as evidence of the illness;
  • •requiring normal illness reporting procedures to be followed;
  • •applying discretion according to the degree to which the annual leave was spoiled by sickness; and
  • •applying normal sick pay rules to any day of annual leave that they permit to be reclassified as sick leave.

BIS has also announced that it intends to consult on possible amendments to the WTR later this year in light of these decisions. Given the tribunals' apparent willingness to interpret the WTR to give direct effect to the decisions of the European Courts, however, it may be that any changes to the WTR will be simply a formality by the time they take effect.