Our Law Services
Sick leave and holiday pay
The European Court of Justice recently gave judgment in a case relating to sick leave and holiday pay.
The result is a very disappointing one for employers. The ECJ’s decision is that employees continue to accrue the right to take paid annual leave even while they are off on sick leave. This will be most pronounced in cases of long term sickness.
The ECJ observed that the Working Time Directive (enshrined in English law at the Working Time Regulations 1998) entitles an employee to paid annual leave to enable them to rest and relax. The purpose of the entitlement to sick leave is different, namely recovery from illness.
Whether or not the principle is correct, it will undoubtedly be harsh in practice to businesses and could damage cash flow or cause disruption at an already very difficult time.
Please note that this judgment does not immediately apply in the private sector pending a decision of the House of Lords and possible amendment of the WTR.
However, when (as seems more than likely) UK law changes, the implications will be:-
• Employees accrue their statutory right to holiday pay (which becomes part of their contract) when they are off sick.
• An employee can do this even if their absence goes over into the next holiday year (or even if they are off for the whole of a holiday year) even if the rule is “use it or lose it”.
• An employer will have to pay a departing employee accrued holiday pay in these circumstances, e.g. if the employee leaves having never returned to work after being off sick.
• It appears that employers can still rely on a “use it or lose it” rule in their contracts in these circumstances but only if they give the returning employee the equivalent amount of holiday at another time.
• Possibly the only crumb of good news is that the employee cannot take holiday while actually absent on sick leave! This is provided that the contract does not allow it, as a properly drafted contract will not.
We therefore strongly recommend employers review their health and sickness procedures to see whether they comply with the ECJ ruling and the likely imminent change in UK law.
Employers may also wish to review (the position of any employees who are currently on long-term sick leave.
If you would like an initial discussion, free of charge, about this development and how it might affect your business, please email Andrew Koffman or Matthew Gale at the following email addresses:-
andrew.koffman@salehs.co.uk; matthew.gale@salehs.co.uk
and we will call you within 25 hours.