Employment briefing: the case law continues on holiday pay and carrying over holidays due to sick leave – without showing any signs of concluding just yet

In our November 2014 briefing we predicted that the issues of holiday pay and holidays accrued on sick leave would be a challenge facing many for some time to come. Nine months later there are no signs of the thread of case law coming to definitive conclusions any time soon on either matter.

Sick leave

On 8 July the EAT handed down its latest decision in relation to the carrying over of annual leave. In Plumb v Duncan Print Group Ltd (UKEAT/0071/15/DA), the claimant had been on sick leave from April 2010 and never returned to work before his employment was terminated on 10 February 2014. At that point he sought a payment in respect of four weeks’ annual leave (but not the additional 1.6 weeks’ leave) for each of the years 2010, 2011 and 2012 which he had not taken. The employment tribunal dismissed his claim, not being satisfied on the evidence that his medical condition prevented him taking holidays in these years. On appeal there were in essence two key legal questions for the EAT to determine.

The first was whether an employee on sick leave had to establish that he or she was not able to take annual leave due to a medical condition, or whether it was sufficient that the employee was on sick leave and simply did not take any holidays.

On this issue, the EAT reviewed the recent decisions of the ECJ as well as the UK case of Larner [2012] EWCA Civ 1034, and decisively upheld Plumb’s appeal. It held that an employee may choose to take annual leave while on sick leave, but is not required to do so. If the employee did not do so, they were entitled to take the annual leave at a later date, or be paid in lieu in respect of such leave on termination of employment. It was not necessary for them to demonstrate that they were physically unable to take the leave by reason of a medical condition. It would be inconsistent with the underlying health and safety purpose of annual leave to compel an employee who is absent from work by reason of sickness to take annual leave at the same time if they did not wish to do so.

The second question was whether there was any limitation on the period in which the employee could carry over annual leave. On this issue, the EAT applied the ECJ case of Schulte (Case C-214/10) and held that the Working Time Regulations 1998 should be interpreted to allow employees to carry over untaken leave for a period of 18 months after the end of the leave year in which the leave accrued.

Both parties were allowed leave to appeal to the Court of Appeal. In doing so, the EAT observed that the issues were of general importance to UK employers and workers alike, involving arguable and complex questions of UK and EU law which was evolving. As such, while the decision provides some welcome guidance to employers, it is unlikely to mark the end of this long-running story...

Holiday pay

If that doesn’t leave you feeling green around the gills, decisions around working time and time off continue to dominate employment law news. Following the European referral in Lock v British Gas Trading Ltd (C-539/12), the matter returned to the employment tribunal for a domestic decision. In the outcome ([2015] IRLR 438) it was held that it is necessary to add words to the Working Time Regulations 1998 to give effect to the Working Time Directive. In particular, the week’s pay provisions of the Employment Rights Act 1996 should be rewritten for the purposes of the regulations so that commission and similar payments are included in the calculation of holiday pay. The tribunal in Lock looked to Bear Scotland v Fulton [2015] IRLR 15 (EAT) for guidance.

British Gas has appealed. It is expected to argue that commission and non-guaranteed overtime are dealt with under different provisions and that the tribunal was wrong to decide that Bear Scotland, a case about overtime, had any bearing on the outcome of Lock. Another argument envisaged is that the EAT in Bear Scotland incorrectly concluded that domestic legislation could be interpreted purposively to give effect to EU law.

In the meantime, the Northern Ireland Court of Appeal has held there is no reason in principle why voluntary overtime should not be included in statutory holiday pay for the purposes of the Working Time Regulations (Northern Ireland) 1998. This decision, however, also left certain questions unanswered.

When it comes to holidays, pay and sick leave in the future… watch this space.

The Author
Amanda Jones, partner, Employment, Maclay Murray & Spens LLP 
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