The thorny issue concerning the relationship between sickness absence and annual leave has generated a significant number of cases over the last few years.

In the most recent of these cases, NHS Leeds v Larner, the Court of Appeal upheld the Employment Appeal Tribunal’s (EAT) decision that a worker who was unable to take four weeks’ annual leave because she was absent from work for a year on sick leave was permitted to receive a payment in lieu of it on termination of employment. This is despite the fact that she had not requested the leave before the end of the leave year, nor had she made a request to carry the leave over to the next leave year.


Mrs Larner went on sick leave in January 2009 and did not return to work. When NHS Leeds terminated her employment on 8 April 2010 she brought a tribunal claim in respect of the statutory holiday entitlement that she did not use during her sickness absence. The Court of Appeal considered the effect of Article 7 of the Working Time Directive. This provides that Member States must ensure that every worker is entitled to paid annual holiday of at least four weeks and is implemented in the UK by regulations 13 to 16 of the Working Time Regulations 1998 (WTR).


Agreeing with the tribunal and the EAT, the Court of Appeal unanimously dismissed the appeal by NHS Leeds. In doing so, it made the following points.

  • The purpose of paid annual leave (to enjoy rest, relaxation and leisure) is different from the purpose of entitlement to sick leave (to recover from illness).
  • The employer was not permitted to make a payment in lieu of annual leave while the employment continued; the only option would have been to allow the employee to carry forward her untaken leave into the next year.
  • It was also clear on the facts that the employee had not had the opportunity to take her annual leave. 
  • The parties agreed that Mrs Larner was able to rely on the direct effect of Article 7 because she was a public sector worker. 
  • Significantly, the Court also concluded that the WTR could be interpreted to comply with the Directive, if necessary, making the judgment also relevant to private sector employers.  


The decision in Larner means that a worker who is unable to take annual leave must be allowed to take it at a later date even if this means carrying it over to another leave year and, on termination, must receive compensation for any untaken leave (which includes previous years’ leave) regardless of whether the employer is a public or private organisation. However, this only applies to the 20 days’ leave under the Directive. The Court declined to deal with the question of how additional leave under the Regulations should be treated.