connect

Connecting North West business to relevant training, insight, conversation and each other

Annual leave unused because of sickness can be carried over for 18 months

Napthens - July 16th 2015

To add to a long line of cases regarding holiday pay, a recent case has provided some clarity on the position regarding the accrual of annual leave during a period of long term sickness.

Currently, it is quite common for a contract of employment to state that annual leave must be taken in the year in which it accrues. However, if an employee is absent due to sickness they will either be entitled to take annual leave during their absence, or carry forward that annual leave into the next holiday year. This choice is for the employee themselves to make.

Plumb v Duncan Print Group Limited
In the recent case of Plumb v Duncan Print Group Limited, the Employment Appeal Tribunal (EAT) discussed whether an employee must show that he/she is unable to take annual leave during a period of sick leave in order to be able to carry it forward, and whether the right to carry annual leave forward to subsequent leave years should be limited.

The EAT held that the Working Time Regulations 1998 (WTR 1998) did not require workers to demonstrate that they are physically unable to take annual leave before they are entitled to carry leave forward. It is enough that the worker is absent on sick leave and chose not to take their annual leave during that period. The EAT’s decision also provided that the right to carry forward leave will not be unlimited, as it held that workers must take accrued leave within 18 months of the leave year in which it accrues where they are unable or unwilling to take the leave during that year because they are on sick leave.

Background
Mr Plumb (Mr P), who worked as a printer, was absent on sick leave following an accident in April 2010 until his dismissal in 2014.  Following his dismissal, Mr P sought to claim for accrued but untaken annual leave for the leave years between 2010 and 2014. His employer refused to pay him for all accrued leave. They agreed to pay for leave relating to current leave year (2013/2014), but not in respect of any leave which accrued during the 2010/2011, 2011/2012 and 2012/2013 leave years.   Mr P sought to claim all accrued annual leave at the Employment Tribunal (ET).

The ET’s decision
Referring to earlier case law, the ET discussed that a key issue to consider was whether an employee was unable to take leave due to sickness. The Tribunal concluded that Mr P was not entitled to the accrued annual leave  because he could not produce sufficient evidence to show that he was ‘unable’ to take annual leave due to his medical condition. Mr P appealed to the EAT on the basis that he was not required to establish, or provide evidence to show, that he was ‘unable’ to take annual leave.

The EAT’s decision
On appeal the EAT overturned the ET’s decision. The EAT held that a worker is not obliged to take annual leave during periods of sickness, nor are they compelled to provide evidence that they are physically ‘unable’ to take annual leave before they are able to carry it forward. The court also held that it was sufficient that the employee was absent on sick leave and chose not to take annual leave during the relevant period. Therefore, the employee was entitled to carry forward the annual leave he had chosen not to take.

Limitations
The EAT recognised that the right to accrue annual leave during a period of sick leave should not be unlimited.

The court explained that currently, the WTR 1998 provides that annual leave must be taken in the year in which it falls; however, there is an exception that annual leave can be carried over to the next holiday year where the employee is on sick leave and is unwilling or unable to take annual leave during that period.

The EAT held that regulation 13(9) of the WTR 1998 should be read so as to allow a worker to take annual leave within 18 months of the end of the leave year in which it accrued, where the employee was unable or unwilling to take the holiday due to reasons of sickness. Therefore, any holiday not taken within 18 months after the leave year in which it was accrued will be lost.

It is important to note that the Judgment only related to the 4 weeks (20 days) holiday provided to employees under European law in the Working Time Directive 2003.

In this case,  the EAT held that Mr P was entitled to payment in lieu of annual leave for 2012 in addition to the annual leave provided by his employer, but not for 2010 and 2011 (accrued leave from 2010 and 2011 expired 18 months after it was accrued).

What does this mean for employers?
Employers should note that employees are not required to prove they are unable to take annual leave while they are absent on sick leave. It is their choice as to when, or if, annual leave is taken.

If an employee is absent on sick leave, their annual leave will continue to accrue, but will be lost if not taken within 18 months following the end of the leave year in which it accrued. So, as an example, let us consider a company whose annual leave year runs from 1st January to 31st December. An employee falls ill and goes off on long term sick leave in April 2010. In this scenario, all holiday accrued by the employee for 2010 must be taken within 18 months of 31st December 2010. If the employee has not taken their holiday by 30th June 2012, it will be lost.

This limitation may be a welcome decision for employers, as it helps to cap the potential accrual of annual leave, and limits the potential cost to employers if, or when, the employment of an employee on long term sick leave terminates.

Permission to appeal was allowed to both parties, so there may be further developments in this area.