European Court of Justice ruling angers business leaders

In a ruling that has dismayed many business leaders, the European Court of Justice has said that workers who are on sick leave will still be able to build up their holiday entitlement.  This ruling could well force a change to UK law.

The issue relating to holiday rights whilst an employee is on long-term sick leave has been considered by the UK courts in recent years, and the issue has created a great deal of uncertainty. This uncertainty has, to a point, been resolved in the European Court of Justice (ECJ) in the matter of Stringer & Others v HM Revenue & Customs. In Stringer, the ECJ dealt with a number of questions relating to leave entitlement under European law. This has been considered below within the context of UK domestic legislation.

It will be a shock to many employers across the country that employees that are on long-term sick leave now accrue rights for holiday pay whilst they are off. The majority of employers within the UK do not offer generous sickness benefits, as the cost of such benefits has to be borne by the employer.  The decision on the face of it, appears bizarre to most, as it effectively rewards employees that are on extended absences. The reaction from the CBI, as you might expect, has been unenthusiastic.

“Businesses themselves also suffer when staff take sick leave and we had hoped that a compromise could have been reached over unused holiday time.”

One of the main consequences of the decision will be increased costs to employers as they struggle to manage long term sickness cases.  This ruling in effect overrides what an employee’s contract of employment might say. The question that many business leaders will be asking on this point will be whether in such circumstances it is necessary for employers to allow 4 weeks to be carried over during sickness absence (holiday entitlement under the relevant European directive), or whether employers are forced to have to carry over 4.8 weeks; the current leave entitlement under UK law. This question is likely to be particularly worrying at the moment as leave entitlement within the UK will increase to 5.6 weeks in April 2009.

Carry over

The law now allows workers on sick leave to build up their leave entitlement,and where they are unable to take this holiday during the leave year, they are able to carry it forward to the following leave year. In Stringer, the ECJ stated that a worker should not be prevented from being able to take leave which they accrued whilst sick. Where this happens, the person must be allowed to take the leave at a later date. The UK Working Time Regulations 1998 do not appear to permit leave to be carried over to the next year. This therefore requires parliament to amend the law in order to ensure that it can be read in line with the ECJ decision. 

Payment on termination

The ECJ ruling also underlined the point that workers who leave an employer must be compensated for any leave they have accrued whilst sick, but not taken. This aspect of the ruling appears to be entirely consistent with The Working Time Regulationson the point. 

Holiday during sickness absence

Previously the Court of Appeal had said that an employee was either off sick or on holiday, an employee couldn’t take holiday while off sick.  However, the ECJ took a different view in Stringer. They stated that there was nothing wrong, in principle, with employees having to take sick leave and holiday leave simultaneously. In other words, an employer could treat part of the sickness absence as holiday, and pay the individual accordingly. In order to allow this to happen in the UK, it will either be necessary for parliament to amend the law, or for the House of Lords to rule on the matter; as it is currently considering a case on the point. This will no doubt come as welcome news to employers across the country.

The case of Stringer has clearly had far reaching implications for employers within the UK, and indeed throughout the European Union. It is likely that this topic will remain within the spotlight until parliament considers the implications of the case, and makes amendments in light of the ruling. There is no doubt that employers will be encouraging parliament to redress the balance on the issue of holiday entitlement, back in favour of employers, especially in these testing times.

"We would like to thank Sarah Payne for her help in our dispute with our buyer and former conveyancing solicitors. We have learnt a lesson and will now leave all our conveyancing to Barr Ellison."
Ivan and Sue Woodhouse

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