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Holidays and long term sickness absence – again!

Another day, another decision on holidays and long term sickness absence.

In NHS Leeds v Larner [2012], the Court of Appeal has held that a worker who was unable to take 4 weeks’ annual leave due to sickness did not have to make a request to carry the untaken leave over into the next holiday year for her to receive a payment in lieu of it on termination of employment.

It has previously been open to employers to argue that leave has to be requested before the employee can argue it has been deemed to be carried over; the EAT decision of Fraser v South West London St George’s Mental Health Trust [2012] confirmed this.

For public sector employers, the Larner decision confirms that in relation (at least) to the 4 weeks’ leave offered by the Working Time Directive, if employees are off sick and do not take all of this leave, any untaken days will have to be carried over into the next holiday year and paid for when they leave (whether or not they requested it take it at the time).

Whilst the picture remains murkier for private sector employers, the door on legal arguments that can be used to try and save employers the cost of implementing the ECJ’s decisions in Stringer and Pereda appears to be closing. In Larner, the Court of Appeal confirmed that the UK’s Working Time Regulations 1998 (the “Regulations”) could be read in light of these decisions. With comments like this made by the Court of Appeal, it will be difficult to try and distinguish the private sector from the public sector on this issue.

The only point that remains clearly in employers’ favour in this area is that the case law has confirmed that leave may not be carried over an indefinite number of leave years (the ECJ’s decision in KHS AG v Schulte [2012]).This should mean that employees off sick for 2 years or more, for example who are members of insurance backed sick pay schemes, cannot carry leave over all the years of their absence. As yet, the area of insured sick pay schemes remains untested here.

Grey areas that remain:

  1. how the Government will amend the Regulations to comply with the Directive. It made its initial proposals in the Modern Workplaces consultation in May 2011 but a response following the close of this consultation is still awaited;
  2. to what extent the UK’s additional 1.6 week’s leave can be treated differently to the 4 weeks’ leave offered by the Directive. The Government’s consultation suggested that carry over will only be allowed up to a maximum of 4 weeks rather than the full 5.6 weeks provided by UK law; and
  3. whilst we know carry over is not indefinite (Schulte) it remains unclear how much time has to pass before an employee loses their right to take (and be paid for) leave. It would be helpful if the Government could suggest a period when they confirm how they are going to amend the Regulations.

The cases in this area have been plentiful. They have exemplified the extent to which the judiciary is prepared to stretch the interpretation of current legislation when it appears to contradict an applicable EU Directive. Much of the drama could have been avoided if the Government had clarified how the Regulations would be amended earlier. Let’s hope, for the sake of employers waiting to amend their sickness absence policies, that the Government’s clarification of how the Regulations will be amended will now be forthcoming.

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