A ruling on workers’ right to leave when absent due to ill health may have unintended consequences, says Nicola Powell
The question of a worker’s right to annual leave whilst on sickness absence has been a hot topic in recent years. A right to at least four weeks of paid annual leave is found in the European Working Time Directive (“the Directive”), and is implemented into UK national law under the Working Time Regulations 1998 (“the Regulations”).
Historically, case law (both domestic and European) has been inconsistent with legislation and confused the issue as to what extent workers have the right to carry over holiday whilst on sick leave. However, the recent case of NHS v Larner has provided some clarification.
Mrs Larner was employed by NHS Leeds. She was on sickness absence between 2009 and 2011 during which time she did not take annual leave or ask to carry it forward. In April 2011 Mrs Larner was dismissed. NHS Leeds refused to pay her in lieu of her untaken 2009/2010 annual leave and she subsequently claimed for this entitlement under Article 7 of the Directive.
The Employment Tribunal and Employment Appeal Tribunal (EAT) agreed that Mrs Larner had the right to carry forward her accrued annual leave to 2010/11 and to be paid in lieu of that untaken leave on termination of her employment. Notably, the EAT held that where an employee was unable to take paid leave due to sickness, that leave would carry forward to the next holiday year regardless of whether a request was made.
The EAT’s decision was upheld by the Court of Appeal which also suggested that, read in line with the Directive, the Regulations could be taken to apply to workers within the private sector. The result is that employers cannot avoid paying holiday for four weeks’ annual leave in the year prior to termination (which is the entitlement under the Directive).
Following Larner, it seems that employers should allow workers to carry over their accrued holiday where they have been on sickness absences. The extent to which construction employers actively promote such a policy will no doubt vary between employers.
While it may appear to be good news for employees, the inevitable long-term reaction from employers is not something that is quite so desirable for them. In short, it is likely that employers will act far more quickly to dismiss those on long-term sick leave than they might otherwise have done.
Employers may dismiss employees absent on sick leave at the beginning rather than at the end of an annual leave year. Continuing employment does not cost anything (because the employee is not being paid) and the employer will then potentially only have to pay the small proportion of holiday pay accrued in the preceding year.
Another possibility, particularly for longer serving employees, is for employers to force them to take holiday during their notice period (either using the right to do so under the Regulations or by inserting a clause to that effect
into their employment contract). Such action would ease the financial burden considerably.
Many employers may also attempt to reduce the length of time that they pay contractual sick pay to their employees. This is partly to set off the cost of paying holiday pay and partly because it is not considered good practice to commence an ill health dismissal procedure (or at least dismiss an employee) until contractual sick pay has been exhausted.
So, whilst the Larner case has not been welcomed in the construction industry, the reality is that employers can adapt to cushion what at first seems to be a significant financial blow.
Nicola Powell is a member of the employment team at IBB Solicitors
