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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. Lets 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 ECJs 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 Appeals 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 ECJs 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 employees 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 employees 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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The content on this page is provided for the purposes of general interest and information. It contains only brief summaries of aspects of the subject matter and does not provide comprehensive statements of the law. It does not constitute legal advice and does not provide a substitute for it.

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