Under the European Union Working Time Directive, workers are entitled to a minimum four weeks' paid annual leave.
The Court of Justice of the European Union (formerly the European Court of Justice) has held that when an employee is too ill to take his holiday entitlement during the year in which it accrues, he can carry it forward into the next holiday year (and beyond).
The Working Time Regulations, which were meant to implement the Directive in the UK, state expressly that the basic holiday entitlement “may only be taken in the leave year in respect of which it is due.”
This express prohibition on carrying over holiday has been ignored by some Employment Tribunals which, in the light of European case law, have been prepared to read additional words into the Regulations so as to allow the carry over of untaken leave by sick workers.
In the case of Neidel v Stadt Frankfurt AN Main, the European Court ruled that a German law providing for a carry over period of nine months for untaken leave was incompatible with European law, as it was shorter than the twelve-month reference period to which the leave related (i.e. the holiday year).
Our Government is currently consulting about how long employees should be allowed to carry forward untaken holiday if they are too ill to take it in the leave year in which it accrues. In the consultation document (“Consultation on Modern Work Places”) it proposed that ill workers should be entitled to carry their four-week basic annual leave entitlement, but only into the following leave year.
However, in another European Court case (Shulte) it was said that “the carry over period must be substantially longer” than the leave year and in that case the European Court accepted that a limit of fifteen months was permissible.
A pre-requisite of good law is that it should be clear and certain. Currently, the law in relation to holiday entitlement for long-term sick employees is neither.
Although on a day to day basis this uncertainty is not a major problem, in one-off cases when employees are too ill to work for, in some cases, years, it can be difficult for HR managers to explain to senior executives why a long-term sick employee who may not have been seen in the workplace for five years is entitled to five years’ holiday pay on the termination of their employment.
Employers have a number of options. The first is that they can wait until the law is clarified. The second is that they can introduce a provision into employment contracts that provide for a carry over of fifteen months. They might also allow employees on long-term sick to take holiday entitlement in the year in which it accrues, despite the fact that they are away sick. In such cases, holiday pay would take the place of contractual or Statutory Sick Pay (if payable), it would, in any event, avoid the build-up of a significant financial liability
Employers should also specify that holiday entitlement in excess of the four-week period either can or cannot be carried over in the subsequent holiday periods and if it can be carried over, the duration of that carry over should be expressly stated.
The Neidel ruling does confirm that the additional 1.6 weeks’ (8 days for a full time worker ) additional leave under the Working Time Regulations is not subject to the carry over judgments of the European Court, on the basis that it is for member states to decide whether holiday entitlement in excess of 4 weeks can be carried over from one leave year to the next
At present, the 1.6 weeks (8 days) additional leave under Regulation 13A of the Working Time Regulations can be carried forward into the next leave year, but no further, if that is allowed in the employer’s contract, or a collective agreement.