Recent sick/annual leave developments

Topic: Sickness absence

Who: Advocate General (ECJ)

Where: Luxembourg

When: March 2008

Law stated as at: 30 March 2008

What happened:

Case Report:  Her Majesty's Revenue and Customs v. Stringer

Under the Working Time Regulations 1998 ("WTR") all workers are entitled to:

• 24 days' paid leave per year; and
• A payment on the termination of their employment in lieu of the holiday entitlement they have accrued but not taken in the leave year in which their employment ends. 

Under the WTR there is no requirement for an employer to allow an employee to carry over unused leave from one year to the next.

There have been several conflicting cases over the last few years on whether a worker who is off work on sick leave is also entitled to accrue annual leave, and whether an employee who has been on leave for the full leave year should be paid in lieu of their holiday entitlement on the termination of their employment.

In Commissioners of Inland Revenue v. Ainsworth and others the Court of Appeal held that a worker on long term sick leave cannot designate part of their sick leave as paid annual leave.  Further, a worker who is dismissed and has been on sick leave since the start of the leave year cannot claim payment in lieu of untaken holiday.

However, this case was appealed and the House of Lords referred these issues to the European Court of Justice ("ECJ") for clarification. The case is now referred to as Her Majesty's Revenue and Customs v. Stringer.

The Advocate General to the ECJ has now published an assessment of the relevant law. Although this opinion is not legally binding, it is usually followed by the ECJ whose decision is expected in the coming months.

What are the consequences of this opinion in practice for employers in the marketing and advertising sector?

The Advocate General's Opinion

The Advocate General concluded that:

1. Workers who are absent from work on sick leave are entitled to accrue annual leave but they cannot take holiday whilst they are absent on sick leave; and
2. Workers are entitled to an allowance in lieu of leave which has been accrued but not taken due to illness irrespective of whether the worker has been on sick leave for all of part of the year.

In a separate opinion, on a different case, it has been suggested that workers absent on sick leave throughout an entire leave year should be able to carry over their annual leave so that this can be taken on their return to work.  This conflicts with the WTR which currently provides that holiday entitlements cannot be carried forward from one year to the next.

Why this matters:

• Employers will have to think carefully about when to dismiss an employee on long term sickness absence if the opinion is followed by the ECJ (as anticipated).  Workers who are dismissed towards the end of the year will be entitled to a payment in lieu of their accrued leave for the full holiday year, whereas a person who is dismissed at the beginning of the next year will be entitled to a limited accrued holiday payment because they are not, under the current legislation, entitled to carry forward leave from one year to the next.  It will be open for employers to "time" a dismissal so as to avoid making a payment in respect of accrued holiday. 
• Workers on sick leave may try to return to work early in order to claim paid annual leave. Employers may address the consequential health and safety issues by contractually requiring such workers to undergo an independent medical assessment. 
• Irrespective of the ECJ's decision employers will still be able to reduce contractual holiday entitlement in relation to periods of sickness absence (however, this needs to be expressly provided for in the employment contract).