There has recently been a further case on long-term sickness and a worker’s right to accrue untaken annual holiday leave (Fraser v Southwest London St George’s Mental Health Trust). Mrs Fraser was on long-term sick leave after she injured her knee in an accident at work in November 2005. She was eventually dismissed in October 2008 and brought a claim under the Working Time Regulations 1998 (WTR) for non-payment of holiday pay in respect of two of the previous leave years during which she had been absent and had not made use of any of her annual leave entitlement. The Employment Tribunal (ET) dismissed her claim. Whilst accepting that she had accrued the right to claim paid annual leave in each of the two years in question, in order to exercise that right it was necessary for her to give notice to the Trust, under WTR Regulation 15(1), that she wished to do so. She had not done this because she did not realise that she could.
The Employment Appeal Tribunal (EAT) upheld the ET’s decision. In its view, an employee is only entitled to holiday pay under WTR Regulation 16(1) if he or she has actually taken the leave in respect of which they seek to be paid, and has done so by giving notice in accordance with WTR Regulation 15(1). Having taken account of European case law on this issue, the EAT held that it was clear that "an employee who is off work as a result of sickness has a choice. He or she may choose to take annual leave during the period when they would anyway be absent sick – that might at first seem a surprising choice, but if his or her sick pay is exhausted it might in fact be attractive – or they can ask for it to be deferred until a later period. But it is for the employee to ask."
In the EAT’s view, had Mrs Fraser made a request to take the annual leave accruing following her recovery, the Trust might have been obliged to agree to her request. If it turned out that she had not had the chance to take that holiday before her dismissal, she might then have been entitled to payment in lieu of the untaken leave. However, she did not do so.
The European Court of Justice (ECJ) has subsequently handed down its ruling in KHS AG v Winfried Schulte regarding questions referred to it by the German courts on the correct interpretation of the EC Working Time Directive, which the WTR implement into UK law. The ECJ's decision supports that of the EAT in Fraser. In the ECJ’s view, the precise terms of the provisions regarding the carry-over of untaken holiday leave for workers who are on long-term sickness leave are a matter for individual Member States. However, the carry-over period for taking any entitlement to holiday accumulated during the sickness absence must be more than any leave reference period, but national law which limits the period to, say, 15 months may be lawful under EU law. The ECJ stressed that the entitlement of every worker to paid annual leave must be regarded as a particularly important principle of EU social law from which there can be no derogations and whose implementation by Member States must be confined within the limits expressly laid down by the Directive. The ECJ stressed that "the entitlement to paid annual leave may not be undermined by imposing conditions that are difficult to meet". It therefore seems likely that the Regulation 15 issue will be revisited in due course.
It should be noted that the decision in Fraser currently stands in conflict with the decision in NHS Leeds v Larner, which held that if the employee choses not to elect to take their accrued annual leave during their sickness absence it will be presumed that they were unable to do so, and therefore even where the employee makes no mention of their annual leave it will be automatically carried over until such time as they elect to use it or their employment terminates.
Whilst the judiciary seems to prefer the employer-friendly decision in Fraser and Schulte for the time being, the issue remains unresolved for UK employers.