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• Legal Newsletter Q4 - A Legal Opinion

A Legal Opinion

When is an employee on long-term sickness absence entitled to be paid for annual leave?

"This is an area of law where there continues to be confusion not only among HR professionals but also in contradictory judgements from the courts.

"The most recent case on this issue, Fraser v Southwest London St George's Mental Health Trust, addresses the question of whether an employee must specifically make a request for holidays during the period of their sickness absence to be entitled to payment on termination of their employment for accrued holidays from previous holiday years.  In this case the Employment Appeal Tribunal ("EAT") held that an employee on long-term sick leave (and indeed other employees) must request annual leave in accordance with Regulation 15 of the Working Time Regulations 1998 to be entitled to payment for it. Regulation 15 includes a requirement that an employee must give the employer a set period of advance notice of the days when the employee intends to take any part of their annual leave entitlement.

"The employee in Fraser, a nurse, had been absent from work from November 2005.  She was eventually dismissed in October 2008.  The employer's holiday year ran from April to March each year.  The employee was only paid for accrued holidays during the holiday year in which she was dismissed and received no holiday pay for the previous two years (which included large periods of time when she was on no pay).   The employee lodged a claim in the employment tribunal for four weeks' holiday pay for each of these previous two holiday years. 

"At the Employment Tribunal the claim was unsuccessful because during the two year period for which holidays were claimed the employee had not given notice under Regulation 15 of her intention to take annual leave during that two year period.

"The employee appealed to the EAT but was unsuccessful.  The EAT considered the previous authorities on this point, including decisions of the Court of Justice of the European Union, and agreed that the employee required to give notice to take holidays in order for the right to payment for accrued holidays to arise.

"This case will no doubt be welcomed by employers as many employees on long-term sick leave, like the employee in this case, often do not specifically request to take annual leave during their absence.  If they do not do so before then end of the holiday year then this case would suggest that they will lose their entitlement.

"However, this case ought to be treated with an element of caution.  This case adds to the already conflicting EAT authorities on this point and it is at least arguable that the case is not consistent with Court of Appeal and Court of Justice of the European Union authorities. Regardless of whether this specific case is appealed, this is unlikely to be the end of the dispute on this matter.  It will undoubtedly take a case from one of the higher courts or the Court of Justice of the European Union before there is clarity on this issue.  In the meantime, the confusion for employers remains. 

"Faced with a situation where an employee leaves their employment in circumstances where they have not complied with the requirements of Regulation 15 in relation to a request for annual leave for previous holiday years, we would recommend that employers take the approach of following this case and not paying the employee for annual leave in respect of such periods of time (the employee will, of course, remain entitled to payment in respect of any annual leave entitlement for the current holiday year).  However, employers should be aware that a subsequent decision on this point may mean that annual leave payments in these circumstances will need to be made."

David Hughes is an Employment Law Partner at Simpson & Marwick.