The EAT has decided that workers who are absent from work for an entire pay year should be paid in respect of statutory holiday pay for that period upon termination of their employment, even if the worker had not asked to take any statutory holiday.

In the case in question (NHS v Larner (UKEAT/008/11/CEA)), Mrs Larner had been off sick for the entire pay year and had made no request to take holiday during that time. Her employment with the NHS was terminated by reason of capability. On termination, the NHS did not pay her in respect of untaken holiday and she brought a tribunal claim seeking payment for her untaken statutory holiday.

The NHS argued that it was not obliged to pay Mrs Larner for her untaken statutory holiday because the Working Time Regulations 1998 state that a worker must give notice if he or she wants to take leave.  It argued that, as Mrs Larner had not given notice to take leave, she consequently lost her entitlement on termination of employment.

The issue for the EAT to decide was therefore whether an employee loses his or her right to statutory holiday if he or she has not requested annual leave before employment is terminated.

The EAT decided that Mrs Larner had not had the opportunity to exercise her right to take statutory holiday because she had been off sick for the period in question. She was therefore entitled to carry over her accrued statutory holiday to the next leave year. Since her employment terminated before she had the opportunity to take the accrued statutory leave, she was entitled to be paid in lieu on the termination of her employment. There was no requirement that she request the holidays for this right to arise.

In its decision, the EAT likened this case to the ECJ's decision in Pereda v Madrid Movilidad SA - in that case, the employee had an accident during a period of annual leave and was consequently signed off sick. He was entitled to replacement leave on his return to work because he had been unable to exercise his right to enjoy a period of relaxation. The EAT held the same was true of Mrs Larner - because she was off sick, she had not had the opportunity to take her statutory holiday.

The EAT commented that the position might be different if a fit employee failed to request any holiday during the whole of a pay year, because such an employee would have had the opportunity to take holiday during that time. However, this part of the judgment is not binding.

Employers will need to ensure that holiday (or pay in lieu of holiday) in respect of employees on long term sickness absence is dealt with appropriately in the light of this case.