In the past couple of years there have been a couple of very significant cases which have had an impact on the interaction between sickness absence and holiday entitlement.
The first of these cases was Stringer v HMRC in which it was confirmed that employees who are absent on sick leave continue to accrue statutory annual leave (i.e. 5.6 weeks) whilst off sick and, if the employment relationship ends, a worker who has been on sick leave and unable to take their holidays is entitled to a payment in lieu of statutory holidays not taken.
The second case was Pereda v Madrid Movilidad SA where the employee was off sick as a result of illness during most of the period he had been booked on annual leave. He requested a new period of holidays which was refused. It was ultimately decided by the European Court of Justice (this was a case in Spain) that this was not right. An employee should be able to request holiday at another time. The court noted that the purpose of annual leave is to allow the employee a period of rest, relaxation and leisure, while sickness absence is for the purpose of allowing the employee to recover from an illness or injury.
More recently another case (NHS Leeds v Larner) has also strengthened an employee’s position regarding annual leave. Mrs Larner was absent for medical reasons for the whole of a holiday year; she had not arranged any holidays before she was signed off and did not make any requests while off sick. She was then dismissed for capability reasons but was not paid for her untaken holidays. NHS Leeds argued that, because she had not requested holidays, she was no longer entitled to them, i.e. the lack of request meant that the entitlement expired at the end of the leave year.
Neither the Employment Tribunal nor the Employment Appeals Tribunal agreed with this reasoning. As in the Pereda case, Mrs Larner had not been able to exercise her right to take holidays because of her sickness and was therefore entitled to take them at a later date; as she was dismissed this meant she was entitled to be paid for the untaken holidays.
The Government have already commenced consultation on changes to the Working Time Regulations which will clarify this. In the meantime the Government’s guidance is this:
Statutory annual leave entitlement to paid annual leave continues to accrue during sick leave even if the employee is on sick leave for the whole year and does no work.
Workers can take their statutory annual leave at the same time as sick leave and receive their normal rate of pay, or take the missed annual leave at a later date and may be able to carry over missed leave to the next leave year.
Payments in lieu of leave upon termination of employment must include any untaken statutory annual leave even if the employee has been on sick leave for the whole of the leave year.
The practicality of these cases means that an employee could raise a holiday pay claim under both the Working Time Regulations or as an unlawful deduction from their wages under the Employment Rights Act.