Legal Update: Is a worker on sick leave entitled to be paid in lieu of unused annual leave when their employment is terminated?

27 July 2015

In Plumb v Duncan Print Group Limited the EAT considered whether a worker, who had not requested holiday while absent on sick leave, was entitled to payment in lieu of accrued statutory annual leave when his employment ended.

The Claimant had an accident at work in 2010 and remained on sick leave until his employment ended in February 2014. He had not taken any annual leave for the years 2010, 2011 or 2012 and requested to take all of his accrued annual leave in 2013. The Respondent refused to allow the Claimant to take his first three years leave, but allowed him to take his accrued leave for 2013. On termination of his employment he brought a claim for payment in lieu of untaken annual leave. 

Regulation 13(9) of the Working Time Regulations 1998 (the “WTR”) requires a worker to take annual leave within the leave year in respect of which it is due. However, in NHS v Larner the Court of Appeal held that where a worker was “unable or unwilling” to take their annual leave because they were on sick leave, they were entitled to take their annual leave at another time when they were not sick. 

The ET dismissed the claim. The ET held that, applying Larner, the Claimant had to establish that he was unable to take his annual leave by reason of his medical condition. As no medical evidence had been produced to say that the Claimant was unable to take his annual leave, the ET thought his claim should be dismissed. The ET did not consider whether the Claimant was also unwilling to take his annual leave.

On appeal the EAT held that the ET had erred in law by concluding that the Claimant had been required to show that he was unable to take his annual leave because of his medical condition and by disregarding his unwillingness to do so, thereby misapplying Larner. The EAT considered that a worker on sick leave has a choice about whether to take annual leave, and if they do not want to it can be carried over to a later date. 

When considering the second issue, whether there is a time limit on carried over annual leave, the EAT relied on KHS AG v Schulte and held that accrued annual leave may be carried over for a period of 18-months. In Schulte the ECJ held there should be a time limit and thought a period of 15 months was not contrary to the Working Time Directive. The EAT thought if a worker carried over annual leave indefinitely it would not serve as the intended rest period, but would amount to a period of relaxation and leisure. Account was also taken of the International Labour Convention 132 which states that annual leave must be taken no later than 18-months after the end of the leave year in which it accrued. The Claimant therefore lost his right to be paid annual leave for 2010 and 2011 but was successful in his claim for the 2012 leave year.

Given the importance of these issues, and the evolving nature of the law on holiday pay, both parties have been given leave to appeal to the Court of Appeal. However, in the meantime workers and employers alike can rely on the EAT’s decision as it has provided much needed clarity. The wording of Regulation 13(9) WTR must for now be interpreted in line with both Larner and Plumb.

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