Workers On Long Term Sick Leave – Non-Payment Of Holiday Pay

The judgment of the House of Lords in the long-running case of Stringer and others v HM Revenue and Customs (HMRC) will be a blow to many businesses struggling to survive in the current economic climate. The Law Lords have overturned the decision of the Court of Appeal and found in favour of the employees.

The cases concerned HMRC employees who had been off work for substantial periods without pay but who remained employees, for example on account of long-term sickness.

The key issues to be decided were whether a worker who is off work for a long period without pay is entitled to claim statutory paid holiday under the Working Time Regulations 1998 (WTR) even if he or she has not attended work during the relevant period and, also, whether the rules on unlawful deduction from wages are relevant in that situation. Under the Working Time Regulations, there is a three month time limit for such claims. If, however, claims can be brought under the Employment Rights Act 1996 (ERA) and it can be shown that the claim is part of a series of unlawful deductions then, provided a claim is brought within three months of the last deduction, there is no time limit on how far back the claim can go.

In January 2009, the European Court of Justice (ECJ) dealt with the first issue, ruling that employees who have been on sick leave for a long period should be allowed to take accrued holiday on their return to work or be paid in lieu at their normal rate of pay if the employment relationship ends without them returning to work.

Further to this finding, the House of Lords has unanimously agreed that holiday pay does count as wages and, where it has not been paid, a claim can be brought for unlawful deduction from wages under the ERA.

Whilst this decision brings clarification regarding some aspects of this issue, questions still remain. Although the ECJ held that the right to take holiday is not extinguished if an employee is on long-term sick leave, it is up to the national courts to decide whether paid leave can be taken during a period of sickness or whether it should be carried over to another year. As things stand, the WTR in the UK state that workers must take a minimum of four weeks’ holiday in each leave year and the payment in lieu of untaken minimum leave is not permitted except on termination. It will therefore require further case law or a change in the legislation to resolve the remaining problems.

Says Emmanuelle Ries, “This decision opens the way for backdated claims by employees on sick leave who have been denied their entitlement to paid holiday. Employers are advised to seek advice when dealing with this complex issue.”

The material contained in this article is provided for general purposes only and does not constitute legal or other professional advice. Appropriate legal advice should be sought for specific circumstances and before action is taken.

© , July 2009

Please contact:

Emmanuelle Ries - Partner

DD +44 (0)20 7553 9938

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