Just what the doctor ordered?

As many of you will be aware there has been a great deal of case law on the issue of holiday entitlement to those on long term sick leave.  It is now clear that those workers on sickness absence continue to accrue their annual leave entitlement during this time and that they can take annual leave at the same time as being absent due to sickness.  However the area which is less clear cut is whether an employee on sickness absence can claim holiday pay where they have failed to give notice to take the leave to their employer. The latest in the string of sickness cases is Fraser v St George’s NHS Trust which has provided some clarification on this potentially confusing, yet important, issue; Lara Feghali has reviewed the case and sets out the implications for employers below.

The Facts

Mrs Fraser had an accident in November 2005 and was paid sick pay until August 2006, when her entitlement ceased. In November 2007, she was certified as fit to return to work, though not in her previous role as a nurse. The Trust resumed paying her in November 2007, though were unable to redeploy her and so ceased paying her in March 2008 and dismissed her in October 2008. Mrs Fraser was paid in lieu of her untaken entitlement for the 2008/09 holiday year (April to October 2008). No payment was made to her for the holiday years 2006/07 and 2007/08.

Mrs Fraser lodged a Tribunal claim for an unlawful deduction from wages and non-payment of her statutory holiday entitlement under the Working Time Regulations 1998 (WTR).

The Decision

The Employment Tribunal accepted the Trust’s argument at the hearing which was that, in order to have exercised her right to paid holiday.  Ms Fraser should have made a specific request to her employer during her employment.  Having not done this her entitlement therefore expired at the end of the holiday year.

Ms Fraser appealed to the EAT who rejected her appeal and upheld the Tribunal’s decision. In reaching its decision the EAT examined the recent case law and the conflicts between various cases and reached the following conclusions:

• No entitlement to holiday pay unless worker tries to take holiday
  Mrs Fraser argued that the fact that she had not taken holiday during the two leave years in question did not affect her entitlement to holiday pay.  This argument reflected the decision in Canada Life v Gray  which held that if an employer has made it clear either explicitly or implicitly that employees on sick leave may not take annual leave then on termination of their employment an employee will be entitled to claim for unpaid holiday as a series of deductions from wages under section 23 Employment Rights Act 1996, going back six years.

The EAT, however, concluded that Canada Life was " wrongly decided on the issue in question" and therefore held that a worker should not be entitled to statutory holiday pay without giving notice to take holiday.

• If sick workers wish to carry over holiday entitlement they must ask to do so
  The EAT held that the decision in Pereda v Madrid Movilidad SA (as set out in our article of 2009 and our update in 2010)  was correctly decided and applied to this case.  Pereda held that a worker on sick leave can either take statutory holiday (and receive pay for it) while off sick or can request a deferral of the holiday. Mrs Fraser had wanted to defer taking her statutory holiday but did not state this and as such the entitlement lapsed at the end of each leave year. 
• Employer not obliged to inform worker of her rights under "general law"
  Mrs Fraser also argued that the Trust had been in breach of contract for failing to inform her of the notice requirement regarding holiday pay. This argument was rejected by the EAT who held that there was no such duty on an employer.

What does this mean for employers?

This is potentially good news for employers who have employees on long term sickness absence.  It indicates that even though an employee is entitled to leave for that which was untaken during the year in which termination takes place, their ability to claim for holiday pay for previous years is restricted unless they specifically requested to take it. 

The EAT made it clear that they saw no reason why the general rule of “use it or lose it” should not apply and that the onus is on the employee to request leave, rather than for an employer to advise employees of their rights.

However, it should be noted that this decision directly conflicts the decision in NHS Leeds v Larner [2011] IRLR 894 EAT  which came out earlier this year. This case held that a worker on long-term sick leave who does not request holiday is entitled to be paid for it on termination. In Larner it was held to be important that the claimant was signed off sick for the whole of the leave year and so was held not to be well enough to exercise her "right to enjoy a period of relaxation and leisure" at that time.  As a matter of law, therefore, she "did not have the opportunity" to take her statutory holiday.

An appeal against the decision in Larner is due to be heard in the Court of Appeal (although no date has been set for this yet) and this should provide a resolution to this matter.  In light of this, employers may want to adopt a cautious approach when dealing with a request for pay for untaken holiday in this situation and give full consideration to the potential risks of following the decision in Fraser.