Employees are entitled to holiday pay for annual leave not taken whilst on long-term sick leave

Long-term sick leave and holiday pay:

In a landmark employment case the Court of Appeal has decided employees who have been on long-term sick leave will be entitled to receive holiday pay accrued during that period upon termination of their employment, even where the employee has not submitted any requests for annual leave during the period of absence.

The case acts to remind employers of the following key points:

• Employees continue to accrue annual leave whilst on long-term sick leave.
• Employees on long-term sick leave are entitled to carry any paid annual leave they have not taken forward to the next leave year without making a prior request.
• If an employee who has been on long-term sick leave is dismissed before being able to take the leave they have carried forward, they will be entitled to payment for the leave they were prevented from taking.

Details of the case:

In the case of NHS Leeds v Larner [2012] the Court of Appeal held this week that an NHS worker who was absent for the whole leave year and who did not submit any requests for annual leave during her absence was entitled to holiday pay on the termination of her employment. 

Mrs Larner worked at NHS Leeds, which had a holiday period running from 1 April to 31 March. Mrs Larner went off sick on 5 January 2009. When Mrs Larner began her period of sick leave, she had not booked any holiday and she did not make any requests to take holiday while she was on sick leave. On 6 April 2010, NHS Leeds made the decision to dismiss her and her employment ended on that date. 

When Mrs Larner claimed unpaid holiday pay, the employer argued that, since no holiday requests were made, the entitlement to annual leave was lost at the end of the pay year. Both the employment tribunal and Employment Appeal Tribunal (EAT) found that Mrs Larner was entitled to be paid for the annual leave that she had no opportunity to take in the employer’s 2009/10 holiday year, even though she had never actually requested any specific holiday. The employer appealed. 

The Court of Appeal dismissed the employer’s appeal and stated:

• Mrs Larner was entitled to paid annual leave in the leave year 2009/10;
• She had been prevented from taking her paid annual leave because she was sick;
• She was entitled to carry her untaken paid annual leave forward to the next leave year in 2010/11 without making prior request to do so;
• As her employment was terminated in that year, before she could take the carried forward leave, she was entitled to payment on termination for the paid annual leave she had been prevented from taking.

Note: This decision does not entitle the employee to be paid on termination in respect of their full contractual holiday entitlement (if such entitlement is greater than the statutory minimum). It applies only to annual leave entitlement under the Working Time Directive (currently 4 weeks). Unfortunately it is not clear whether this also applies to the additional 1.6 weeks annual leave (Bank Holidays) provided to UK workers under the Working Time Regulations.

It is unlikely the Larner case will be the last word on the issue. Watch this space!!

Holmes & Hills Solicitors has a specialist Employment Law lawyer providing Employment Law advice for businesses across Essex and Suffolk.