Holiday Pay and Sickness Case

The Court of Appeal has clarified the law regarding holidays and sickness.

Under current law employees may take their annual leave while they are off sick but they can also choose not to and must be allowed to carry over their leave so as not to lose their entitlement. However, following conflicting Employment Tribunal decisions employers were unsure as to whether they only had to permit ‘carry over’ where a worker had requested the ‘carry over’ of the leave during the leave year. The appeal in the case of Larner was heard by the Court of Appeal in March and the decision has just been reported. The Court of Appeal dismissed the appeal and held that the employee did not need to have requested leave during the leave year in order for it to be automatically carried over to the next year. This could mean that the untaken leave would be payable on termination of the employment. The Working Time Regulations could be interpreted in line with this so that all employers should comply with this rule. This means that employees off sick for long periods will accrue holiday which will either be available to be taken if they return to work or will need to be paid should their employment be terminated. Employers should manage cases of sickness absence as proactively as possible and may also wish to review the position and perhaps set time limits on the utilisation of carried over holiday as part of the contract. Unused leave would only remain available for a limited time (say a year). If you would like any advice in this area please do get in touch.