Annual leave and holiday pay Q&As
Commonly asked questions on the legal issues relating to holiday entitlement and calculating holiday pay
Selected cases reported on holiday entitlement
Here we list a selection of key cases on holiday entitlement, providing a summary of the decision and implications for employers.
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UKEAT/2015/0071
Issue: Holiday entitlement – sick leave
The claimant, a printer, had an accident leading to four years of sick leave. He never returned to work. When his employment was terminated he claimed payment for 60 days’ of untaken holiday for three of the years he had been off sick.
The Employment Appeal Tribunal (EAT) considered the following two questions:
The EAT said no to both these questions. Employees on sick leave do not have to show that they cannot take annual leave because of their condition. They can take leave if they choose, or they can take it later, even in the next holiday year.
However an employee’s entitlement to carry over holiday is not open-ended. In this case the EAT said that the claimant was only entitled to the leave for the last holiday year he claimed for, as more than 18 months had elapsed since the end of the previous two holiday years. Therefore, employees may carry forward holiday for a further 18 months from the end of the year in which the holiday arose. The EAT gave both parties the right to further appeal.
UKEATS/0015/12
Issue: Holiday entitlement and sick leaveA handyman and car wash worker worked for a company for a number of years until he suffered a stroke in July 2010. He was then on sickness absence until he resigned in June 2011. He was entitled to 28 days’ statutory annual holiday and his sickness absence had spanned across two leave years. On the termination of his employment he was not paid in lieu for the leave that he had been unable to take during these two leave years due to his sickness. He claimed unlawful deduction of wages for all the holiday accrued during this period, including the the additional 1.6 weeks statutory leave, provided for under the UK Working Time Regulations which is over and above the four weeks’ annual leave provided for under the EU Working Time Directive.
This decision case follows on from two earlier cases, NHS Leeds v Larner (25 July 2012) and Neidel v Stadt Frankfurt am Maim (C-337/10, 3 May 2012). The first case confirmed that it was possible to interpret the law so that carry over was possible for the four weeks’ provided for under the EU Directive. In the second case the European Court of Justice (ECJ) held that where national law provides for additional statutory leave each member state can basically decide what to do about carry over and payment in lieu of additional leave.
The Employment Appeal Tribunal held that the employer was not required to allow the additional 1.6 weeks to be carried over, or replaced with payment in lieu on termination. Employers are required to permit employees to carry over the four weeks' annual leave provided for under the EU Working Time Directive (WTD) where employees have been unable to take this due to sickness. However, employers are not also required to allow employees to carry over the additional 1.6 weeks' annual leave provided for under the domestic legislation. Such carry over is subject to agreement between the employer and employee. In this case there was no relevant agreement and the employee was not entitled to payment in lieu of the additional leave accrued during his absence. The EAT ordered that his payment therefore be deducted accordingly.
[2012] EWCA Civ)
Issue: Accrual of holidays during sick leave
In this long running case a clerical worker in the NHS was absent on sick leave for the whole of the leave year April 2009 to March 2010. She took no paid annual leave during this period. When she was dismissed she was not paid for the untaken leave. The NHS said she was not entitled to this leave because she had not requested that it be taken or carried over to another leave year.
The Court of Appeal has now confirmed that the clerical worker was entitled to payment in lieu of this untaken leave on termination, even though she had not requested for it to be carried over to another leave year.
C-78/11
Issue: Holiday entitlement – sickness and absence holidays
A Spanish collective agreement expressly allowed workers to reschedule a planned period of paid annual holiday if it clashed with temporary absence resulting from pregnancy or childbirth and so on. There was no similar provision for general sickness. The matter of whether sick workers should have a similar right was referred to the Court of Justice of the European Union (CJEU).
The CJEU emphasised that the entitlement to annual leave is a crucial principle of EU law from which there can be no exceptions. It therefore held that a member state must not deprive a worker who becomes unfit for work during a period of paid annual leave from having that paid annual leave. It emphasised that the purpose of annual leave and sick leave are different and the sick employee should be entitled to rearrange the affected period of leave even if this means carrying it to the next leave year.
Issue: Holiday entitlement – untaken leave
This German case is part of the ongoing sequence of cases dealing with long-term sick leave and the interrelationship with annual leave and holiday pay.
In Germany legislation allows for a carry-over period for untaken leave of nine months, so that public servants forfeit leave if it has not been taken nine months after the end of the leave year because of sickness. The case was brought by a fireman who had annual leave from 2007 to 2009 of 26 days in each year. From 2007 he was unfit for service on medical grounds and he retired at the end of August 2009. The fireman sought almost 17,000 euros as payment in lieu of the 86 days' annual leave that he had accumulated, but not taken. The German court referred the following matters to the Court of Justice of the European Union (CJEU) asking if the entitlement to take holiday in lieu conferred by the Working Time Directive (WTD) applies to:
The CJEU ruled that:
Case C-282/10
Issue: Holiday entitlement – conditions
Some aspects of EU law have direct effect. This means that those EU provisions are enforceable directly in the UK or any other member state regardless of whether that country has introduced specific national laws to implement the EU provisions.
The Court of Appeal in East Riding of Yorkshire Council v Gibson [2000] IRLR 598, CA previously said that Article 7 of the Working Time Directive (which gives four weeks annual leave) was not precise enough to have direct effect. However in this case it was decided that Article 7 of the Working Time Directive does have direct effect.
[2011] UKSC 57
Issue: Annual leave – offshore workers
The Supreme Court considered the meaning of ‘rest periods’ in the Working Time Regulations 1998. The workers in the oil and gas industry had a shift pattern of two weeks working offshore followed by a two weeks off on shore known as a field break. The workers said that their annual leave should encompass leave from the offshore work, while the employer said it was entitled to insist that annual leave was taken during the periods when the workers were onshore, irrespective of whether the workers were in fact working during that period. The Supreme Court agreed with the employer and said that it was entitled to insist that the workers took their annual leave during the periods when they were onshore.
Case C-214/10
Issue: Accruing holiday while on sick leave
In this German case Mr Schulte had been on long-term sick leave for six years. On the termination of his employment he brought a claim for payment in lieu of annual leave which he had accrued whilst off sick. The German court referred the case to the Court of Justice of the European Union (CJEC) (formerly ECJ) because it was unsure whether under the Working Time Directive holiday rights can expire when a worker is on long-term sick leave.
The Advocate General handed down an opinion that the Directive does not require the unlimited accumulation of annual leave by workers who are on long-term sick leave. An acceptable limit could be set by Member States.
The CJEC took an even broader view than the Advocate General and said provisions about carry over of leave are a matter for each Member State as long as workers get breaks from work. A worker who loses their right to leave due to illness should not be denied the opportunity to take their leave. However, indefinite accumulation of entitlement to leave is not required.
'Otherwise, a worker, ......who is unfit for work for several consecutive reference periods, would be entitled to accumulate, without any limit, all the entitlements to paid annual leave that are acquired during his absence from work. A right to such unlimited accumulation of entitlements to paid annual leave, acquired during such a period of unfitness for work, would no longer reflect the actual purpose of the right to paid annual leave...'
It appears that the expiry of annual leave entitlement 15 months after the end of the relevant leave year provided by German law would be sufficient, or to be on the safe side 18 months would be preferable.
UKEAT/0456/10
Issue: Employee on sick leave
The claimant was on long term sick leave from November 2005 following an accident at work. Her entitlement to sick pay expired in August 2006. Some two years later she was certified fit for a limited return to work and the Trust resumed paying her in 2008. However, no work was found for her and she was subsequently dismissed later that year. She received pay in lieu of untaken leave which accrued in the final leave year beginning in April 2008, but not in respect of the two previous leave years. She claimed, among other things, that she was entitled to payment in respect of four weeks’ annual leave for each of 2006 and 2007.
The Employment Appeal Tribunal (EAT) confirmed that entitlement to holiday pay under the Working Time Regulations 1998 (WTR) depended on her having given proper notice of her intention to take annual leave. As she had not done so, the right to leave, or to any payment in lieu, was lost. The EAT also confirmed that there is no duty on an employer to advise its employees of their rights as a matter of general law.
(ET/1503084/10 and 1503085/10 2011, ET)
Issue: sickness absence and annual leave
This is another case about sickness absence and annual leave. The law in this area is contradictory.
In this case a traffic controller and a port controller both with long service were entitled to contractual paid holiday entitlement of 33 days per year. There was no contractual entitlement to carry over unused holiday from one leave year to the next. One employee was off sick for over eight months and the other for over four months. Neither employee took or asked to take annual leave while off sick. The employees stated that:
The employer refused the requests for leave. The employees then brought employment tribunal (ET) proceedings under the Working Time Regulations 1998 (WTR) for refusal to permit them to exercise their rights to accrue annual leave while off sick and carry it over, where required, to the following leave year.
The ET held that the WTR, whilst incompatible with the Working Time Directive (WTD), can be interpreted in a consistent way by using the principle set out in EBR Attridge Law LLP and another v Coleman (No.2) [2010] IRLR 10 EAT.
In summary the ET therefore considered that employees should carry over the annual leave accrued during their sickness absences to the following leave years. The employees therefore won.
[2010] IRLR 288, EAT
Issue: Holiday entitlement - notice provisions for requesting holiday
An employee worked on a ‘zero hours’ contract. He had nine days leave outstanding at the beginning of March which had to be taken by 31 March which was the end of his employer’s leave year. He had no work scheduled for March and asked to take the nine days leave. The employer refused, saying that the employee had not given four weeks’ notice required in his contract. The contract also stated that late leave applications ‘would be considered on their merits and subject to staffing arrangements’. The employee resigned and claimed unfair constructive dismissal and the nine days holiday pay.
The EAT held, allowing an appeal, that if workers do not take their leave by the end of a leave year, they can lose it, provided that the employer has not operated the notice periods in an unreasonable way so as to deny leave. However, the appeal was allowed in this case because the employment tribunal had not considered whether the request for leave had been refused in accordance with the contractual provisions – the merits of the request and staffing arrangements.
(unreported, ET/1809311/09, ET)
Issue: Carrying over holiday
An employee had booked four weeks holiday which was agreed by his employer. The worker broke his ankle and had to take three months off work. He asked for the four weeks holiday to be rescheduled, but as this would fall into the next leave year, the employer refused. The employee brought a claim under the Working Time Regulations 1998 (WTR).
The employment tribunal allowing the claim, held that the Working Time Regulations (WTR) can be interpreted in accordance with the European Court of Justice (ECJ) decision Pereda v Madrid Movilidad SA and therefore the refusal to carry over the leave was a breach of the WTR. Stringer v HMRC, another ECJ decision, was also taken into consideration in the decision. The decision is not binding on other tribunals.
Stringer and others v HMRC [2009] ICR 985, HL
Issue: Working time
The Stringer case is a complex piece of litigation which has been to the Court of Appeal, House of Lords and ECJ. Following guidance from the ECJ the House of Lords eventually decided that workers absent from work on long term sickness absence since the start of the leave year, who had exhausted both their contractual and statutory sick pay, did accrue statutory holiday and should be allowed to take that holiday. The House of Lords also ruled that claims in relation to statutory holiday pay can be brought as a claim for unlawful deductions from wages under the Employment Rights Act 1996 (ERA). Annoyingly some other issues did not form part of the House of Lords decision such as:
Please note: While every care has been taken in compiling these notes, CIPD cannot be held responsible for any errors or omissions. These notes are not intended to be a substitute for specific legal advice.
Commonly asked questions on the legal issues relating to holiday entitlement and calculating holiday pay
Frequently asked questions on the legal issues relating to bank holidays