The Sheffield Employment Tribunal has ruled that an employee who had been absent due to sickness for 15 months was entitled to be paid his entire statutory holiday (which spanned 2 holiday years) under the Working Time Regulations (WTR) upon termination of his employment.
Although Employment Tribunal decisions are not binding on other Employment Tribunals, this case demonstrates how Tribunals are dealing with the issue of holiday and sickness, following last year's decision by the European Court of Justice (ECJ) in Stringer v HM Revenue and Customs, that workers who are absent due to sickness continue to accrue paid statutory holiday under the WTR (see Howes Percival Newsflash 22 January 2009). This decision confirms that Employment Tribunals are willing to apply ECJ decisions regarding holidays to UK cases, despite the WTR's prohibition on carrying over more than 8 days holiday to the next holiday year.
Therefore when an employee is off sick for an entire holiday year, employers who wish to take a cautious approach should ensure that a period is designated as holiday and pay the employee for it. When employment ends, the employee should be paid all statutory holiday accrued during their sickness absence – even if it spans more than one holiday year.
However when the Stringer case returned to the House of Lords they did not resolve the question of whether employees have to actively seek to take their statutory holiday during a period of sickness absence in order to be paid for it nor did they confirm that employees can claim accrued holiday upon the termination of their employment for more than one holiday year. Therefore it may still be possible to take a more robust approach and only pay employees their statutory holiday during a period of sickness absence when they request it and limit payments of accrued holiday upon termination of employment to the current leave year. Employers should be aware though that such an approach does risk a Tribunal claim for unpaid wages, which could result in an order to pay the employee all of their accrued statutory holiday.
In the case of Rawlings v The Direct Garage Door Company Limited (Direct), Mr Rawlings was off sick from 2004 until his employment terminated on 5th April 2006.
Direct's holiday year ran from 1st January to 31st December. On 1st December 2004 the Sheffield law centre informed Direct on Mr Rawlings behalf, that Mr Rawlings intended to take his statutory holiday for that year from 2nd December to 30th December 2004. Direct agreed and paid Mr Rawlings his holiday pay for that period.
However when in December 2005 Mr Rawlings phoned Direct to ask when he would be getting his holiday pay for that holiday year, Direct informed him that following the Court of Appeal's decision in Commissioners of Inland Revenue v Ainsworth (later named Stringer), he was not entitled to any holiday pay.
In March 2006 Mr Rawlings brought a claim for his holiday pay for 2005 to the Employment Tribunal. His employment terminated on the 5th April 2006 for reasons unconnected with his claim for accrued holiday pay. Mr Rawlings' Tribunal claim was stayed pending the outcome of the Stringer decisions. Following decisions by the ECJ and House of Lords in 2009, the stay on Mr Rawlings claim was lifted and he amended it to also include a claim for accrued holiday pay for the period 1st January to 5th April 2006 and for his entire claim to be brought as an unlawful deduction from wages claim (rather than under Regulation 30 of the Working Time Regulations). Given the length of time Mr Rawlings claim had been stayed an Employment Judge allowed these amendments to his Tribunal claim.
The Employment Tribunal upheld Mr Rawlings claim of unlawful deduction from wages in respect of his holiday pay for 2005 and 2006. The Employment Tribunal confirmed that the ECJ's decision in Stringer had held that employees cannot be prevented from accruing or taking paid statutory holiday because they have been unable to work due to sickness. Furthermore the House of Lords decision in Stringer confirmed that employees can bring a claim of unlawful deduction from wages in respect of any unpaid accrued statutory holiday pay. Therefore Mr Rawlings could bring a claim for his unpaid holiday for 2005 and 2006 as a claim for unlawful deduction from wages.
The Employment Tribunal ruled that as Mr Rawlings was unable to take his holiday in 2005 and 2006 due to sickness, he was entitled to his accrued statutory holiday for the whole holiday year for 2005 and a proportion of his accrued holiday up to 5th April for the holiday year 2006. It awarded Mr Rawlings the sum of £1,554.92 to be paid to him by Direct.