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Should employees on long term sick leave be entitled to paid holiday which they have not requested? No, according to the Employment Appeal Tribunal (EAT) in Fraser v Southwest London St George’s Mental Health Trust.
This is a notoriously complex area of employment law that has given rise to a series of cases both in the UK and in Europe. Fraser comes on the back of two key judgments from the European Court of Justice (ECJ): Stringer v HM Revenue & Customs Commissioners and Pereda v Madrid Movilidad SA. Stringer confirmed that statutory holiday entitlement continues to accrue and can be taken during sick leave. Pereda added that a worker who is on sick leave during a period of previously booked annual leave has the right, on his request and so that he may actually use his annual leave, to take that leave during a period that does not coincide with the period of sick leave, which may be a subsequent leave year if it is not feasible to take the leave in the year in question.
The EAT acknowledged that requiring an employee on sick leave to ask for holiday seems artificial. However, this is no more artificial than a period of sick leave counting as holiday in the first place.
So where does this leave employers? Although there will undoubtedly be further litigation in this area, here is our guidance on some of the key questions, based on the cases to date:
Q: What happens if an employee on long term sick leave requests that their annual leave entitlement be deferred until they return to work?
A: The employer should accept the request. The complications begin where the sick leave straddles two or more holiday years. The comments from the EAT in Fraser suggest that an employer may be obliged to grant a request to carry over annual leave from one holiday year to the next, which could result in a payment in lieu of carried over holiday if there is a subsequent termination of employment before the leave is taken e.g. where the employee does not recover his or her health and return to work and is therefore dismissed.
Q: What happens if an employee does not request to carry over annual leave whilst off sick?
A: The EAT's approach in Fraser is "use it or lose it". Therefore, a failure to request carry over means an employee will lose their right to holiday pay at the end of the leave year. If right, this will potentially penalise employees who lack the benefit of legal advice or the foresight to ask to take holiday or carry it over before the end of the holiday year. However, the EAT reached more or less the opposite conclusion in the recent case of NHS Leeds v Larner, in which it was held that a sick worker’s untaken statutory holiday entitlement is carried over to the next leave year regardless of whether or not the worker has formally requested that this happen.
The point is due to be reconsidered by the Court of Appeal and it is hoped this will provide employers with greater certainty. Employers should be aware that if they follow the Fraser decision and refuse to pay holiday pay for past years, this could well result in claims relying on the decision in Larner.
Q: Can an employee request that annual leave be carried over indefinitely?
A: The ECJ has just handed down its decision in KHS AG v Schulte, confirming that national rules may set a limit on the carry over of annual leave accrued during sick leave. It noted that a right to unlimited accumulation of entitlement to paid annual leave during sick leave would no longer reflect the dual purpose of the right to paid annual leave (i.e. first, to enable a worker to rest from carrying out the work he is required to do under his contract and, second, to enable a worker to enjoy a period of relaxation and leisure).
The ECJ confirmed that whether a national carry-over period, after which untaken annual leave expires, complies with the Working Time Directive will depend on whether it can be reasonably described as a period beyond which annual leave ceases to have the effect of a rest period and is merely a period of relaxation and leisure. In this case, the ECJ confirmed that a carry-over period of 15 months was not contrary to the purpose of the right to paid annual leave, as it ensured that annual leave retained its positive effect as a rest period.
Q: Are employers required to advise employees they must request their holidays (or carry over), otherwise they will lose their entitlement?
A: No. The EAT in Fraser indicated that the obligation on employees to request holidays is a matter of general law and employers are not obliged to advise on such matters i.e. there is no duty of care on the employer to notify the employee of his or her rights although a clear written policy on such matters would help to avoid disputes.
Clare Parkinson, Solicitor in Fieldfisher’s Employment and Pensions practice.