The Employment Appeal Tribunal (EAT), in this case, has held that, whilst employers are required to permit employees to carry over the 4 weeks' annual leave provided for under the EU Working Time Directive, where employees have been unable to take this due to sickness, employers are not required to allow employees to carry over the additional 1.6 weeks' annual leave, provided for under domestic legislation – such carry over is subject to agreement between the parties.
The European Working Time Directive (WTD) provides that employees are entitled to 4 weeks' paid annual leave. The Working Time Regulations (WTR), which implement the WTD in the UK, provide for an additional 1.6 weeks' paid annual leave, making employees entitled to 5.6 weeks' leave.
There is some incompatibility between the WTD and the WTR with respect to whether employees are entitled to carry their entitlement over to another leave year, or be paid in lieu of the leave on termination of employment, where they have been unable to take the leave due to sickness. The Court of Appeal in the case of NHS Leeds v Larner last year confirmed that it was possible to interpret the WTR in line with the WTD so that such carry over was possible, in respect of the 4 weeks' provided for under the WTD.
The court declined to decide whether the WTD require additional 1.6 weeks' to be treated in the same way but referred to the case of Neidel v Stadt Frankfurt am Maim, in which the European Court of Justice (ECJ) held that where national law provides for additional statutory leave, it need not entitle employees to payment in lieu of such leave on termination - national law may make conditions about payment in lieu of additional leave.
Mr Healy (H) worked for Sood Enterprises Ltd (S) and was entitled to 28 days' statutory annual holiday. He suffered a stroke in July 2010 and was on sickness absence until he resigned in June 2011. His absence spanned across 2 leave years, which ran from January to December. Upon termination he was not paid in lieu for the leave that he had been unable to take during these two leave years, due to his sickness. He brought a claim for unlawful deduction of wages and the ET upheld his claim, ordering S to pay H in lieu of holiday accrued during this period, which included holiday over and above the 4 weeks' provided for under the WTD. S appealed, arguing that the additional statutory leave, provided for under the WTR, should be excluded from the calculation.
The EAT found that the WTD does not require employers to allow the additional 1.6 weeks' to be carried over, or replaced with payment in lieu on termination. Regulation 13A(7) of the WTR provides that the 1.6 weeks' cannot be carried over without a "relevant agreement" between the parties. The case of Neidel makes it clear that national law may make conditions as to the payment in lieu of additional leave and Regulation 13A(7) is such a condition. As there was no relevant agreement between H and S, H was not entitled to payment in lieu of the additional leave accrued during his absence, and the EAT ordered that his payment therefore be deducted accordingly.
What does this mean for employers?
This case provides welcome clarification on this point, which was left unanswered in the case of Larner last year. Employers will welcome the decision that additional leave cannot be carried over without a relevant agreement between employer and employee. This position is also consistent with the Government's proposed amends of the WTR. In its "Modern Workplaces Consultation", the Government outlined its proposal to amend the WTR to clarify that annual leave can be carried over where employees are unable to take the leave due to sickness and refers to the carry over of 4 weeks' annual leave and not 5.6. The Government suggested a number of other amends to the WTR and its response to the consultation is still awaited.
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This note does not constitute legal advice. Specific legal advice should be taken before acting on any of the topics covered.