Holiday entitlement for employees on sick leave

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Under European law, workers are entitled to a minimum of 20 days' paid holiday each year, which equates to 20 days for full time workers.

In the UK, the Working Time Regulations 1998 (WTR) provide for an additional 8 days holiday for full-time employees, amounting to 28 days in total.

The WTR provide that 20 days holiday must be taken in the holiday year in which it is due and it may not be carried over to the following year and may not be replaced by a payment in lieu, except on termination of employment.

In 2012, the Court of Appeal confirmed, in the case of NHS Leeds v Larner, that workers on long term sick leave, would carry over the minimum 20 days' holiday entitlement into the next holiday year and that an employee did not have to specifically request holiday in order to do so.

The Court of Appeal did not, however, decide whether the additional 8 days enjoyed by UK workers should be treated in the same way.

The Employment Appeal Tribunal (EAT) appears to have now resolved the situation in the case of Sood Enterprises Limited v Healy.

Mr Healy, an employee of Sood Enterprises Limited, became ill in 2010 and was off sick until he resigned in June 2011.  In accordance with the terms of his contract, Mr Healy was entitled to 28 days holiday in each leave year.  As a result of his illness, Mr Healy was unable to take the remainder of his 2010 holiday entitlement (17 days) and had accrued an additional 14 days in 2011 up to the date of his resignation.  Mr Healy asked to be paid in lieu of his accrued holiday but Sood Enterprises refused and so Mr Healy brought a claim in the Employment Tribunal for unpaid wages.

Sood Enterprises argued that in the event Mr Healy was entitled to carry over his untaken holiday from 2010, this should be calculated on the basis of the minimum 20 days leave as set out in Regulation 13(1) of the WTR and should not include the additional 8 days that are referred to in Regulation 13A. 

The Tribunal that heard Mr Healy's claim initially agreed that Mr Healy should be entitled to carry forward and subsequently be paid for his full 28 days entitlement (pro rated) for both holiday years 2010 and 2011.  However, this decision has now been overturned by the Employment Appeal Tribunal.

The EAT confirmed Regulation 13A(7) of the WTR requires a "relevant agreement" to be in place in order to allow the additional 8 days' statutory leave to be carried over into the next leave year.  The EAT agreed that Mr Healy had a right to the full 28 days in 2011, pro rated to the date of his resignation, but held that as there was no relevant agreement in place between Mr Healy and Sood Enterprises, Mr Healy was only entitled to carry over 20 days entitlement from 2010. 

In reaching its decision, the EAT relied on the judgment of the European Court of Justice (ECJ) in Niedel v Stadt Frankfurt am Main in which the ECJ held that member states could provide for a period of holiday over and above the minimum period required by the Working Time Directive and could attach such conditions to that additional holiday period as they saw fit.

Our view:

This is a welcome decision from the EAT and gives employers clarification in relation to how to deal with the holiday entitlement of employees on long term sick leave.