The Court of Appeal held in the case NHS Leeds v Larner that a worker, who has not taken paid annual leave in the relevant year due to sickness, is entitled to a payment in lieu on termination of employment without having made any prior request to carry the leave forward.

What does this mean?

A worker does not lose  the right to paid annual leave because they are sick during the holiday leave year, where the sickness prevented them from taking paid annual leave in that year. In such instances the worker is entitled to take paid annual leave at another time when they are not sick and, if necessary, in another leave period. However, where the employment relationship is terminated before the worker is able to take the leave, they will be entitled to a payment in lieu.

What should employers do?

Employers should ensure that workers who have been prevented from taking holiday leave by reason of sickness, are given the opportunity to take it  later If that is not possible because their employment has been terminated, payment in lieu should be made.