Sickness and the right to holiday pay

Lara Murray, an employment law specialist at Palmers Solicitors, looks at the issues raised by two recent court rulings on sickness and annual leave

Rulings at both the European Courts of Justice (ECJ) and the Court of Appeal have highlighted the need for employers to ensure they are aware of their obligations when it comes to paying employees for holiday entitlement not taken due to sickness.

The first case, referred to the ECJ by a Spanish employment tribunal, revolved around the question of whether an employee should be able to reschedule planned annual leave if it coincides with illness that would ordinarily have rendered them unfit for work.

An earlier case, that of Pereda v Madrid Movilidad SA, had determined that if prearranged annual leave coincides with a period of sickness then the worker in question should be given the option to reschedule the leave, including carrying it over to the next year, if necessary. In this case, Mr Pereda had gone off sick before his annual leave period began.

However, in the latest case, Asociacion Nacional de Grandes Empresas de Distribucion (ANGED) v Federacion de Asociaciones Sindicales (FASGA) and others, the issue was whether this applied when the worker fell ill during the pre-arranged period of annual leave, rather than before it.

The ECJ ruled that in such cases, the annual leave could be rescheduled to a later date. The reason for this was that the purpose of paid annual leave was to enable a worker to enjoy a period of relaxation and leisure, while the purpose of sick leave is to allow a worker to recover from an illness which has left them unfit for work. A worker has the right to take their full entitlement of paid annual leave, so therefore has the right to take it at a later date if they would otherwise be unable to work due to illness during that same period. It is irrelevant whether the incapacity occurred before or during the annual leave period because the issue is whether an employee has taken their full entitlement.

Many employers may be concerned that this decision could give workers the opportunity to skive by falsely claiming they were ill during their annual leave period in order to gain extra time off. However, this can be addressed by implementing procedures such as requiring a medical certificate and excluding certain illnesses, including hangovers.

The second case, NHS Leeds v Larner, looked at the issue of whether an employee who is off sick should lose their holiday entitlement just because they have not requested it.

The Court of Appeal upheld a tribunal’s decision that a worker who had been on sick leave for an entire leave year without taking any holiday was entitled to be paid for that year’s unused holiday entitlement when their employment ended. They were also entitled to ask for that entitlement to be carried over to the next leave year. The claimant had not had the opportunity take or request her accrued annual leave as she had been dismissed while still on sick leave.

While the Court stopped short of offering judicial guidance, the ruling sends out a clear message to employers.

This article was written by Lara Murray an associate solicitor in our employment law department. The solicitors within the department are all members of the Employment Lawyers Association and can assist both businesses and individuals across a wide range of sectors on all areas of employment law, including disciplinary and grievance procedures, confidentiality and restraint of trade, tribunal representation and negotiating settlements. For further information, please click here.