Holidays for the long term sick

  Holidays for the long term sick

You may have missed the significance of a recent ruling of the European Court of Justice ('ECJ') in the joined cases of Stringer and Schultz-Hoff. The ruling relates to the question of whether an employee can accrue and take statutory annual leave entitlement during sick leave and has potential costs implications for UK employers.

Background

In 2005, the Court of Appeal ruled in Stringer (then Commissioners of Inland Revenue v Ainsworth) that, under the Working Time Regulations 1998 (WTR), which implement the EC Working Time Directive (EWTD) in the UK, a worker could not take paid annual leave during a period of sick leave and confirmed that,  if a worker's employment ended without them having worked at all during the holiday year, they would not qualify for a payment in lieu of untaken leave. The Court of Appeal's decision was appealed to the House of Lords. Their Lordships referred the case to the ECJ, where Stringer was joined with a German case: Schultz-Hoff.

ECJ Decision

In summary, the ECJ decided that when a worker is absent on sick leave, their entitlement to paid annual leave under the EWTD continues. Although there is no obligation to allow the holiday to be taken during sick leave, any holiday a worker has been unable to take must be carried over (although the WTR currently do not allow carry-over). And on termination of employment, workers are entitled to a payment in lieu of annual leave they have been unable to take.

What will happen next?

There remain a number of unanswered questions for the House of Lords to determine when they consider the Stringer case either later this year or in 2010. If the House of Lords decides that the WTR are inconsistent with EWTD, then we can expect the Government to introduce amending legislation allowing the carry-over of annual leave, although any such amendments are unlikely to be retrospective.

What should employers be doing now?

Employers in the private sector have some breathing space until the House of Lords communicates its decision on Stringer. This is in part because the WTR as currently drafted do not permit carry over. However, employers are recommended to:

• allow workers to take annual leave which accrues during a current leave year whilst they are on sick leave if it is properly requested
• make a payment in lieu of untaken annual leave which has accrued during the holiday year in which termination occurs
• wait to see if the House of Lords' ruling offers any further clarification as regards carrying forward annual leave entitlement.

In the meantime, there are a number of options employers may consider to limit the effect of Stringer:

• ensure that absent workers are carefully managed and, where appropriate, dismissed. Remember that there is also an obligation to pay long term sick workers notice pay if they are entitled to the statutory period
• reduce occupational sick pay entitlements to offset additional annual leave cost particularly for new starters
• review benefits schemes with reference to PHI cover; and
• amend contracts of employment to prevent annual leave entitlement over and above the statutory minimum from accruing during sick leave.

 Because of the principles of 'direct effect', employers in the public sector are arguably required to apply the ECJ ruling now. This would have the greatest significance in the context of carry over. However, because there are still unresolved issues before the House of Lords, public sector organisations may also prefer to await their Lordship's decision before making any significant changes to their practices in this regard.