Another difficult area in relation to holiday has been in relation to those employees who are on long term sick leave. In Kigass Aero Components v Brown [2002] ICR 697 the EAT held that annual leave accrues even during a period when the employee is on long term sick, and an employee who has used up all their sick pay can still claim payment for four weeks “holiday” even though he was not fit to work. The Kigass decision was overturned by the Court of Appeal in Commissioners of Inland Revenue v Ainsworth [2005] IRLR 465 (now referred to as HM Revenue Customs v Stringer and Others). The Court of Appeal held that the claimant was not entitled to four weeks paid annual leave under the Working Time Regulations in circumstances where they were not actually able to work. The case was appealed to the House of Lords on the principal issue of whether a worker absent due to sickness can claim entitlement to paid annual leave both during and on termination of employment. The Law Lords have referred the case to the ECJ. The question therefore is whether Article 7 (1) of the Working Time Directive means that a worker on indefinite sick leave is entitled to designate a future period as paid annual leave and to take paid annual leave during the period that would otherwise be sick leave. The ECJ has yet to give their decision on this matter.

In the meantime, employers can still specify in an employment contract that contractual leave (in excess of the statutory minimum) does not accrue during sick leave.

Regulation 14(3) (b) of the Working Time Regulations entitles an employer to provide in a relevant agreement the amount of the workers entitlement to pay in lieu of statutory holiday on termination. The employer could therefore provide for pro rata entitlement of time spent on sick leave, provided that the employee’s right to payment in lieu is not totally