NHS Leeds v Larner UKEAT/0088/11

In this case, the EAT held that a worker who had been on sick leave for a whole leave year and who had not taken any holiday during that period was entitled to a payment in respect of that year’s unused statutory holiday entitlement on the termination of her employment.  The fact that she did not request holiday during the relevant year did not mean that her entitlement had been forfeited.  Nor did she have to request expressly to carry it over to be paid in respect of that holiday leave on the termination of her employment.

Mrs Larner was a clerical officer with the NHS.  She went on sick leave on 5 January 2009 and the NHS terminated her employment on 8 April 2010 by reason of capability.  She then claimed holiday pay from 1 April 2009 to 31 March 2010.  The NHS maintained that she lost her entitlement when she failed to give notice that she wanted to take holiday leave before the end of the leave year pursuant to the Working Time Regulations.  Their appeal was rejected.  The EAT held there was no distinction between this case and the Pereda case where the ECJ held that where a worker’s pre-arranged statutory holiday coincided with a period of sick leave she was entitled to designate an alternative period for holiday leave which could mean that the holiday entitlement would be carried over until the next year.   

The Government has proposed amendments to the Working Time Regulations to reconcile the payment in lieu on termination with the Working Time Directive in their consultation on modern workplaces.

Key point:  Where practical employers should consider asking employees who are absent on sick leave to take paid holiday leave during the holiday year.  If a fit employee has failed to request statutory holiday during the relevant leave year his or her holiday entitlement may well be forfeited, but for an absent employee the notice requirements are not mandatory. 

- Advocate General opinion

KHS AG v Schulte C-214/10

On 7 July 2011 the Advocate General delivered her opinion in this case which concerned the relationship between holiday rights under the Working Time Directive and the long term sick leave of a German employee.  She concluded that EU law does not require that workers on long term sick leave accumulate without any time limitation a right to paid annual leave or to payments in lieu of such entitlement.  Allowing a worker to take accrued leave several years after that leave year did not accord with the Directive’s purpose. 

Mr Schulte claimed 60 days paid holiday leave on termination.  The appeal court made a reference to the ECJ as Mr Schulte had been absent on long term sick leave for over 6 years before his employment terminated. 

The purpose behind the Directive is to ensure employees take time off to recuperate from work but after a long term of absence on sick leave, it is in the worker’s interests to be re-integrated back into the workforce rather than being placed on annual leave.  Additionally the unlimited accumulation of entitlement to annual leave might act as an incentive for employers to dismiss seriously ill workers sooner rather than later.  If a payment is made in lieu of untaken holiday on the termination of employment this should be seen as payment for a period of recuperative leave rather than as compensation for loss of rights. Member States are free to fix any period providing it is compatable with the Working Time Directive. A national law under which an annual leave entitlement is extinguished 18 months after the end of the relevant leave year may not offend against the Directive but a carry over period of only 6 months may be insufficient.  

The Advocate General’s opinion may be taken into account in the Government’s consultation on the Regulations in which it is proposed that UK workers on long term sick leave could carry forward up to 4 weeks’ accrued holiday leave into the following leave year,.