Court of Appeal Rules That Employees on Long-Term Sick Leave can Carry Holiday Forward Automatically

LONDON, 25 July 2012 - The Court of Appeal today handed down its decision in an important sick leave case.  The Court confirmed that an employee on long-term sick leave was entitled to carry her holiday forward to the next holiday year, even though she had not asked to do so. This meant that when her employment terminated, she was entitled to be paid for the holiday that had accrued during her absence that she hadn't taken, not just holiday in the leave year in which she was dismissed.

Chris Wellham, Of Counsel in the employment team at Hogan Lovells, commented:

"Allowing long-term sick employees to carry leave forward automatically and to be paid for all the leave that has accrued on termination of employment could be very costly for employers.  This opens the way for employees on long term sickness absence to claim holiday pay for the whole period of their absence when their employment terminates.  For an employee who has been absent for two leave years for example, this could represent nearly three months' pay.

"A number of ECJ cases make it clear that legislation can limit the period for which carry-over is permitted. Although the Modern Workplaces consultation that took place last year suggested that the Working Time Regulations could be amended to introduce a limit, we are still waiting for the outcome of that consultation. Clarification of this aspect of the Regulations would be a good fit with the Government's desire to reduce burdensome regulation and costs for businesses."

In the case NHS Leeds v Larner Mrs Larner had been employed to work at NHS Leeds for 20 hours per week and her terms and conditions stated that she would accrue annual leave during sick leave but that it could only be carried over in exceptional circumstances. The leave year ran from 1 April to 31 March.  Mrs Larner went off sick on 5 January 2009 and on 6 April 2010 NHS Leeds dismissed her and informed her that "a payment in lieu of notice and any outstanding leave will be made to you".

Mrs Larner brought an employment tribunal claim for unpaid holiday pay under the Working time Regulations 1998 because NHS Leeds hadn't paid for holiday leave that had accrued in the 1 April 2009 to 31 March 2010 holiday year.  NHS Leeds argued that as no holiday requests were made, and the employee did not ask to carry the leave forward, the annual leave was lost at the end of the 2009/2010 holiday year. It therefore did not have an obligation to "buy out" that leave at the end of Mrs Larner's employment, as would usually be the case.  However, the Court of Appeal has found that Mrs Larner was entitled to be paid for the annual leave, which she had no opportunity to take because of her illness, even though she never actually requested any specific holiday. The holiday carried forward to the next leave year automatically.

The decision resolves a conflict between two decisions of the Employment Appeal Tribunal (EAT) in 2011. The EAT decided in Larner that the entitlement to be paid for accrued but untaken leave from an earlier leave year is not dependent on the employee having to submit a request for the leave before the end of the relevant leave year. However, a later decision in Fraser v South West London St George's Mental Health Trust found that an employee could only carry leave forward if he or she asked to do so. The Court of Appeal has now confirmed the approach taken by the EAT in Larner.

The judgment can be found at:

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