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Holiday sick pay approved by European Court of Justice
29 January 2009
The European Court of Justice (ECJ) ruled last week that
employees on long term sick leave still accrue entitlement to
holiday, which they can then take when they return to work, or be
paid for on termination of employment – even if that is years
later. Let’s have a look at some examples:
Example one
- Holiday year starts 1 April
- Employee goes off sick on 1 April 2009 (so is entitled to 5.6
weeks holiday a year, under the Working Time Regulations 1998, but
four weeks under the Directive)
- Employee returns to work on 1 April 2014
- He or she is entitled to 5 x 5.6 = 28 weeks’ holiday in the
year from 1 April 2014
Example two
As above, but the employer dismisses on 1 April 2014. The
employee has accrued 28 weeks’ holiday entitlement and, in addition
to notice pay etc, must be paid 28 weeks’ holiday pay.
Understanding the decision
The ECJ considered questions referred from two cases; one from
the House of Lords and one by a German Court:
Accrual of holiday entitlement during
sickness
The questions referred by the House of Lords concerned leave
entitlement during sickness absence. The Court stated that it is
not against EU law for the laws of Member States to either:
a. preclude employees from taking holiday
while off sick; or
b. allow employees to take holiday while off
sick
Can leave entitlement carry over from one year to
another?
The questions about whether leave entitlement could carry over
from one year to the next came from the German court. It seems that
in that case there was a national rule precluding employees from
taking holiday during sickness absence.
As a result, the ECJ concluded that, if a worker was prevented
from taking their annual leave because they were off sick, then
they must be allowed to take it later, either in the leave year
when they return to work, or as a payment when their employment
ends.
The ECJ’s logic appears to be that if an employee cannot take
their holiday during a holiday year because they have been off
sick, then they have been deprived of a right guaranteed by EU law.
They must therefore be allowed to take it later.
However, in the UK, an employee is not deprived of their right
to take a holiday if they are permitted to take annual leave while
off sick. In contrast to Germany there is no national law in the UK
precluding this, although part of the Court of Appeal’s ruling in
the UK case was based on the view that one cannot take a holiday
from being off sick.
The ECJ has arguably failed to answer the question put to it by
the House of Lords – namely whether an employee is entitled to
insist on taking holiday entitlement during sickness absence. The
ECJ’s answer was that Member States are permitted to lay down laws
that prevent employees from taking holiday during sickness absence,
but they can also lay down laws that allow employees to take
holiday during sickness absence.
Added expense for employers?
Comments have already been made in the UK and elsewhere that, in
the current economic climate, businesses do not need a ruling that
adds four weeks’ holiday pay a year to the existing costs relating
to employees on long-term sickness.
Possible solutions
This may encourage employers to be less tolerant of employees on
long-term sick leave and to dismiss at an earlier stage than
currently. Dismissals would be fair, so long as the employer has
reached a point where they cannot reasonably be expected to wait
any longer for the employee’s return, and they have followed a fair
procedure, including giving the employee a right to a hearing and
an appeal.
Another solution may be to expressly allow employees to take
their holiday entitlement during sickness absence. If adopted, the
employee’s sickness absence would not have prevented them from
taking annual leave, nor would they have built up large amounts of
accrued holiday entitlement when they return.
What happens next?
The case will now return to the House of Lords in the UK for a
final hearing, which is expected to take place later this year. We
will keep you up to date with any developments in our future
bulletins.
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