Two related developments here and both are good news for employers.
It was established some time ago that a worker on long term sick leave who eventually leaves, can claim pay for any statutory holiday built up during the time off sick. One question has been left in doubt - how far back can the worker claim the holiday pay? The following cases help to clarify.
If sick workers wish to carry over holiday entitlement they must ask to do so
Fraser v South West London St George’s Mental Health Trust
Mrs Fraser, a nurse, went on long-term sick leave in November 2005 and did not return to work before her dismissal in October 2008. After the termination of her employment, the Trust paid her in lieu of her final leave year's statutory holiday entitlement, as required by the Working Time Regulations. However, it did not make a payment in lieu of her untaken holiday entitlement for the previous two leave years. Mrs Fraser brought a holiday pay claim before an employment tribunal.
Mrs Fraser argued that the fact that she had not taken holiday during the two leave years in question did not affect her entitlement to holiday pay in respect of those years.
The Employment Appeal Tribunal (EAT) has held that, unless a worker asks to carry over leave before the year end or asks to actually take the leave, she cannot obtain payment on termination. This makes sense.
There may be a further twist in the tale: there is a Court of Appeal case due to be heard soon on the same question of whether a worker must actively request leave to be carried over. In NHS Leeds v Larner the EAT had reached a conclusion that was the exact opposite to the Fraser case - that a long-term sick worker's untaken statutory holiday entitlement carried over to the next leave year regardless of whether she had formally requested that this happen. When this decision arrives it will take precedence over the Fraser decision and we will of course keep you informed.
In another recent case, the European Court of Justice has held that there is a limit to the length of time an employee on long-term sick leave can continue to carry over untaken statutory annual leave ( KHS AG v Schulte C‑214/10).
In this case, a German collective agreement provided that, in cases of sickness, all holiday not taken within 15 months of the end of the relevant leave year would be lost. The ECJ upheld the agreement, commenting that there must come a time when one of the purposes of the leave (to give the employee a break from work for health and safety reasons) can no longer apply. In view of this, the limit of 15 months on the carry-over period in this case did not infringe the Working Time Directive.
Comment: For the moment we are in limbo – there are two conflicting EAT decisions on whether someone whose sick leave is so long that it straddles more than one leave year, is automatically entitled to carry it over and be paid for it if their employment ends. This is quite unusual in practice so let us know if it applies to you.
With regards to the Schulte case, it seems likely that, in the absence of further guidance, tribunals would uphold a policy of limiting the carry over period to, say, 15 months. If you want to be able to take advantage of this ECJ decision please let us know and we will advise further.