Holiday Pay, Sick Leave & Legal Contradictions

Holiday entitlements and sick leave have become an area of much debate among legal commentators, along with contradictory judgments in the courts. Numerous legal commentators & employment judges (this didn’t include Employment Law Clinic, as we (successfully) argued in favour of the Fraser judgment – that Larner didn’t apply in all circumstances) have suggested that the Court of Appeal’s decision (of July 2012) in Larner v NHS Leeds might have resolved at least the contradiction with an alternative decision of the Employment Appeals Tribunal, Fraser v Southwest London St George’s Mental Health Trust. Indeed, the Honourable Lady Smith questioned whether the matter was resolved by the Court of Appeal judgment when hearing the latest case in this area – Hair Division Ltd v Macmillan.

While Larner has resolved at least one area of conflict – whether notice needs to be provided by a worker[1] intending to carry forward leave if they are off sick for the whole leave year (the Court of Appeal decided it doesn’t – but in such instances, the employer probably has bigger issues to worry about than the entitlement to 20/28[2] days leave: why is a worker off for a whole leave year?) – it didn’t clearly deal with the issue where a worker is actually in work for part of the year before they take time off sick. In this circumstance, Fraser does still apply, and the rule then is “use it or lose it”.

In Hair Division, the EAT went further, clarifying exactly how long not only would the worker need to be in attendance, but also within that period exercising their right to leave in order to be able to potentially carry forward the leave if they subsequently fell ill – balancing the findings between Fraser, Larner, and, without any need to directly reference, Pereda). The EAT observed that the position:

“thus seems to be that if a worker or employee was at work during the relevant leave year for a period which at least matched her annual leave entitlement and had not requested leave during that period, then no entitlement to holiday pay arises after the end of that leave year.”

Or put another way, during the first 20/28 days of the leave year, if a worker is in attendance but doesn’t apply for leave and then goes off sick for the balance of the year (nearly as long as was the case in Larner, but crucially having been in attendance for a few weeks at the start of the leave year), there is no entitlement to carry that year’s leave forward. The important difference here is that the opportunity to take (or even apply for) leave did arise, but this wasn’t exercised.

This does not require that workers should take all of their leave in the first few weeks of a leave year, but to avoid the risk of losing it (or using it while off sick), they would at least need to consider making an application for it then (in Larner the worker was deemed unable to apply to carry the leave forward, so potentially a worker could be unfit to apply for leave later in the year too). Under those circumstances, if they subsequently fall ill and can’t take leave when planned, they have a right (under Pereda v Madrid Movilidad) to use the leave at another time, even if this is a subsequent leave year.

Contrary to some advice that arose following the Court of Appeal’s decision in Larner, it once again then becomes in the interest of an employer to remain quiet – not actively alerting the worker to their entitlement to paid annual leave – while they are on sick leave, on the basis they may fail to request this – annual leave can be taken during sick leave, and if a worker isn’t being paid during their sick leave this could be an attractive option for them; if they don’t apply for it though, the leave can once again be forfeited.

Conclusion over Fraser or Larner (as at November 2012 – employment law evolves regularly)

If a worker is in attendance (or on paid annual leave) for the first 20/28 days of their leave year but does not apply for their full annual leave entitlement (or potentially only for a total of 20 days of their leave), their annual leave allowance may not be carried forward to a subsequent year, and they would lose the entitlement if not taken during the leave year in question, even if they are sick for the balance of the year.

Paid annual leave will need to be provided if applied for & used in the appropriate year, but there will be no need to agree if the application is to carry-forward leave that wasn’t applied for or used when it could have been earlier in the leave year – while the worker was able to attend.

 

Or for legal commentators, paragraph 15(3) of Fraser still stands: “the rule [still] is use it or lose it”: Larner wouldn’t apply – the opportunity to carry the leave forward, even without asking – unless the leave had been requested but the worker was subsequently sick and unable to enjoy that leave.

Addressing Long-Term Sick Leave

Of course, during any long-term absence, an employer needs to do more than remain entirely quiet: they still need to manage these absences, and attempt to get these resolved within a reasonable time-scale – a year or more of sick leave should not be typical at all. For assistance & support with managing leave entitlements, or sick leave (frequent or long-term, get in touch with us – see our Contacts page or complete this form: