ECJ issue decision on holiday entitlement during long term sick leave

As we reported in January 2008 the Advocate General delivered her opinion in the case of Stringer and others v Her Majesty’s Revenue and Customs (previously known as Ainsworth v HMRC) on whether workers on long-term sick leave are entitled to holiday pay.

Today, almost a year later the European Court of Justice has issued its long awaited decision, although at the time of going to press the full written reasons have not yet appeared on the ECJ website. Julian Hoskins reports.

The following questions were referred to the ECJ in relation to a workers potential entitlement to sick leave:

• are workers on indefinite sick leave entitled to (i) designate a future period as paid annual leave and (ii) take paid annual leave, during a period that would otherwise be sick leave? 
• if a payment is made in lieu of holiday, on termination of employment, are workers on long-term sick leave entitled to such a payment and how should any payment be calculated?

The UK Government had argued that workers on long term sick leave should not be entitled to paid holiday on the basis that they are not actually working, so there is no “work” for them to take leave from. The Advocate General had decided that:

• a worker on indefinite sick leave is entitled to designate a future period as paid annual leave; but
• they cannot take this leave during a period in which they would otherwise have been on sick leave; and
• when employment is ended, workers are entitled to a payment in lieu of holiday accrued while on sick leave. The calculation of the payment must ensure that the worker receives an amount which is equivalent to their normal pay.

The ECJ has left it open for the National Courts to go one step further and in its judgment, published today, has held that:

• a worker who is on indefinite sick leave for the whole of an annual leave year is entitled to a period of four weeks’ paid annual leave, despite the fact they are not actually at work;
• the national courts can decide whether the paid leave can be taken during that year, or whether it should be carried over to another year; 
• the right to paid annual leave is carried over at the end of a leave year if the worker was on sick leave for the whole of that year; further he does not lose this entitlement if he was absent on sick leave for part of the year and was still on sick leave when his employment terminates. 

This is a difficult decision for employers, and the practical effect of it appears to be that employees on long term sick leave will continue to accrue leave and have an entitlement to take paid holiday.

If an employee can’t actually take any holiday while they are on sick leave the House of Lords will now have to decide if they can be paid, effectively in lieu of their accrued annual leave during that leave year or whether it should be carried over to another year. Further, if employment is terminated while an employee is on long term sick leave, they will be entitled to be paid in lieu for any accrued but untaken holiday at the date of dismissal.

The case will now return to the House of Lords for their final judgment which is likely to overturn to 2005 decision of the Court of Appeal in the case of Inland Revenue v Ainsworth & Or (subsequently referred to as Stringer) which stated that the right to paid holiday did not accrue during periods of sickness absence.