The question of whether entitlement to holiday accrues during sick leave and whether an employee can take holiday during sick leave has once again come to the fore. In Schultz-Hoff v Deutsche Rentenversicherung Bund and Stringer & ors v HM Revenue & Customs [2009], the European Court of Justice (ECJ) has given its opinion on two related cases: one English the other German.
facts of the English Cases
- Mrs Stringer was absent from work on sick leave. During that sick leave she informed her employer that she wished to take some paid annual leave.
- A group of workers were on long-term sick leave that lasted to the end of the holiday year. As they had been off sick until the end of the holiday year they had not taken all their annual leave entitlement and wished to be paid in lieu.
The claimants in both these scenarios won their employment tribunal and employment appeal cases, but lost at the Court of Appeal (CA). The CA allowed the cases to be referred to the House of Lords who decided to stay the proceedings and refer the matter to the ECJ.
facts of the German Case
Mr Schultz-Hoff (SH) had been on sick leave for various periods before finally going on long-term sick leave. His employment was terminated on 30 September 2005. Before this happened, he had made a request to take annual leave and had been refused on the basis that he was not fit to work and, therefore, was not allowed annual leave.
SH brought claims for payment in lieu of annual leave for the years 2004 and 2005. German law has a similar provision to English law, to the effect that holiday not taken during the leave year is lost. Payment in lieu of such holiday only applies where the employment has been terminated.
SH lost in the first instance and his appeal was stayed and the matter referred to the ECJ.
Questions considered by the ECJ
The practical issues behind the questions considered by the ECJ were:
Question
Can a national court stipulate when a worker can take holiday in the context of being off on sick leave?
Answer
Yes. It is for the national court to decide.
- Therefore a national court can say that holiday can be taken during sick leave.
- A national court may also specify that holiday cannot be taken during sick leave provided it allows for holiday to be taken at some later point, eg on return from sick leave.
Question
Can a national court stipulate that any annual leave that has accrued but not been taken during the sick period is ‘lost’ if it is not taken during the holiday year?
Is the situation any different if the annual leave is not taken because it cannot be taken, eg because absence on sick leave spans the whole of the holiday year?
Answer
A national court can specify instances when holiday will be lost if not taken.
However, if the holiday is not taken because the worker was not able to take it – in this instance because on sick leave – then the worker must be allowed an opportunity to take it, ie ‘carry it over’ to the next holiday year.
Question
If the employment is terminated, is the worker entitled to be paid in lieu of the annual leave and does this include annual leave accrued prior to the leave year in which the employment is terminated?
Answer
Yes. A worker is entitled to annual leave accrued throughout the period of sickness where the failure to take the annual leave has been because the worker has been unable to take the annual leave.
Question
At what rate of pay will the annual leave be paid? For instance where the worker is on zero pay, will the national court be able to specify that annual leave can be taken but on zero pay?
Answer
The rate of pay must be the worker’s normal working pay. It cannot therefore be zero pay or any reduced sickness pay.
Practical implications
The UK Working Time Regulations 1988 will need to be amended as they expressly exclude holiday being carried over into the next holiday year. As this decision means that holiday does accrue during sick leave, it is arguably the case that if an employee is on annual leave and becomes ill, then those days should be credited back to the employee.
Also, for those employers who provide permanent health insurance, this decision could have a serious impact. Often permanent health-insurance schemes state that the individual must remain an employee to continue to benefit under the scheme. Employers have been relatively relaxed about keeping the employee ‘on the books’ as it has not meant any cost to the employer. However, if holiday will accrue – and at the employees normal salary rate – this is going to be an issue.
In terms of managing sickness absence, employers would be wise to consider whether they would prefer employees to take annual leave during sick leave or on their return. In the case of an employee who has been on long-term sick leave for a whole year, this would mean that they have double their annual holiday entitlement in the year they return to work.
By Andrea Nicholls, partner and joint head of employment group, Salans.
E-mail: anicholls@salans.com.
