Money and Law - the rules of annual leave

Time was rescheduling your annual leave was very tricky, especially where sickness and holidays were involved, but the rules are changing

Until recently, a worker off sick would lose their accrued holiday allowance if they did not come back to work before the end of the holiday year. In addition, if a worker became sick during their holiday, there was no legal compulsion on the employer to allow the worker to reschedule annual leave.Two recent judgments have changed this. First came the EC ruling in Stringer and Ors v HM Revenue and Customs. This held that workers on long-term sick leave accrue statutory annual leave and have to be paid for it at their normal rate of pay, even if their sickness lasts the whole of the employer’s leave year.Next came Pereda v Madrid Movilidad, in which the EC ruled that a worker who falls sick during annual leave can request that their employer let them take the holiday leave at another time.In Stringer, the EC ruling required employers to allow workers on long-term sick leave to carry over their unused leave entitlement into the following leave year.  This clashes with the UK Working Time Regulations, which clearly state that the basic four weeks’ leave cannot be carried over into a new leave yearPublic sector workers such as civil servants and teachers can take advantage of the law of direct effect and rely directly on the EC ruling, but the effect of the judgment in the private sector is limited.When the case went back to the UK courts, the House of Lords confirmed that employers should allow workers on long-term sick leave to designate part of that period as paid annual leave before the expiry of the relevant leave year.  This step is also important from an employer’s point of view, since it should prevent workers on very long-term sick claiming that the failure to pay holiday pay is part of a series of holiday deductions.If the worker can establish a continuous failure to pay holiday pay, they may potentially have a higher value claim going back over several leave years.The Pereda judgment means that workers will be entitled to replacement holiday equivalent to the overlap between the period of annual leave originally scheduled and the period for which the worker was sick.  As with holiday, generally the employer can specify that the rescheduled leave be taken at a time that suits the business, but there is only so far an employer can take this. The EC ruling confirmed that ultimately  the employer must agree a suitable time for the worker to take the leave, even if that means carrying it over to the next leave year if the worker can’t take the rescheduled leave in the same leave year.Again, because of the clash between EC and domestic law, only public sector workers can definitively assert their right to carrying over annual leave from one year to the next if they have to reschedule holiday due to having been sick. It may be that the UK government will consider revising the Working Time regulations to allow carry over.  Therefore, while employers would be advised to amend their policies now to allow  workers on long-term sick to designate part of that period as paid annual leave, it would be advisable to hold off changing policies on carry over annual leave so that businesses can wait and see what will happen to UK law. In any event, many employers already allow rescheduling of leave on a discretionary basis and until it is clear what action, if any, the UK government takes, situations involving carry over can continue to be dealt with on a case-by-case basis.In the interim, employers can protect their position by toughening up the normal notification of sickness procedures and stating that this will apply to staff who become sick during a period of leave. Reasonable allowance will need to be made for employees who are abroad and/or in different time zones, but this step should reduce the possibility of some workers abusing the process.  As research has shown that one consequence of the recession appears to be higher sickness absence rates, tightening up sickness procedures is likely to be a useful exercise generally.

Further informationAfter initially pursuing a career in the charity sector, Jenna Hunter combined retraining as a solicitor with working as an immigration adviser. She joined Whitehead Monckton in 2009 as a specialist employment lawyer and deals with a wide variety of issues, including redundancy, TUPE, claims in the employment tribunal/employment appeal tribunal, removal of senior executives and implementing amended employment contracts in the workplace.

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