THERE have been a number of case law decisions over the past couple of years dealing with the position relating to holiday pay for sick workers.
A recent decision in the Employment Appeals Tribunal will give some comfort to businesses and the position is outlined further below.
Under the Working Time Regulations 1998, an employee has the right to take 5.6 weeks paid holiday in each leave year.
There is no provision in the Regulations allowing leave to be carried over and a payment in lieu of unused holiday cannot be made except on termination of employment.
Many businesses will therefore operate a ‘use it or lose it’ policy such that holiday cannot be carried over to subsequent years.
Case law decisions in the European Courts have recently focused on whether employees on long-term sick leave are entitled to carry over their unused holiday entitlement to subsequent years.
Take, for example, an employee who is off for two years. They accrue a certain entitlement in one year and if it is not taken, are they allowed to carry it over to further years and then be paid in lieu of that accrued leave on termination of their employment? The answer, according to the European Court, was “yes”.
This could leave many employers with a significant holiday pay bill to pick up on termination of employment because it meant that any leave accrued over a significant period of time when an employee was absent had to be paid in one lump sum when they left.
The employer’s argument is that if the leave has not been used at the end of the year, the regulations kick in and it cannot be carried over.
The European Courts took a different view arguing that employees on sick leave do not have the opportunity to take holiday so it should be allowed to be carried over.
A recent case in the Employment Appeals Tribunal focused on whether a worker who neither took nor sought to take statutory holiday during a number of years of sickness absence was entitled, on the termination of their employment, to pay in respect of that untaken entitlement.
The employee was a nurse who went on long term sick leave in November, 2005, and did not return to work before her dismissal in October, 2008.
She was paid in lieu of her final year of holiday entitlement as the regulations quite rightly require.
However, the employer argued that the previous two years untaken entitlement did not need to be paid. The employee subsequently brought a claim before the Employment Tribunal.
The Employment Appeals Tribunal considered the fact that under the regulations, an employee has to give notice to take leave in order to be entitled to leave.
The employee in this case did not seek to take any leave in previous years of absence as the regulations suggested so there was no entitlement for that leave to be paid on termination of employment.
The current position is therefore this; an employee on long term sick leave is not entitled to a payment in respect of untaken annual leave accrued historically (except in the last year of employment), if they do not request leave during the holiday year.
However, it does mean that an employee is entitled to take annual leave and be paid for it, as long as they request leave.