Sick leave and holiday

There have been a number of important ECJ decisions interpreting the relationship between sickness absence and statutory holiday entitlement under the WTR. The first of these is Stringer v HM Revenue and Customs, C-520/06). In this case, the ECJ decided that workers accrue holiday while on long-term sick leave and must be allowed to take it on their return to work, or be paid in lieu of untaken leave if their employment ends. Employees on long-term sick leave who are owed holiday pay can bring a claim for the unlawful deduction of wages under the Employment Rights Act 1996 (HM Revenue and Customs v Stringer and others [2009] UKHL 31).

The second important ECJ decision is Pereda v Madrid Movilidad SA [2009] IRLR 959. This case looked at what happens where an employee falls ill while on holiday. The ECJ concluded that an employer cannot force a worker to take annual leave when off work sick. Instead, workers must be allowed to carry over their holiday. In principle, this means that workers who fall ill while on holiday must be allowed to redesignate their statutory annual leave as sick leave and to carry forward the unused holiday to take when they are fit to work.

A further recent ruling has confirmed that employees who fall sick during annual leave are entitled to take corresponding paid leave at a later date. So, for example, if an employee is part way through their holiday and they become ill, assuming they can provide the necessary medical evidence to confirm their incapacity, an employer must allow the employee to take holiday at a later time.

The rationale for the decision is that, under the Working Time Directive, it states that the purpose of annual leave is to enable workers to have a period of rest and relaxation away from work, whereas the purpose of sick leave is to enable a worker to recover from illness. If an employee is on sick leave, they cannot enjoy a period of rest and relaxation so should be entitled to take that leave elsewhere in the year.

However, this right to carry forward statutory annual leave is not without limits. In KHS AG v Winfried Schulte [2011] EUECJ C-214/10, the ECJ confirmed that unused holiday must not be allowed to build up indefinitely, because otherwise the leave would lose its main purpose as a rest period, and instead become “merely a period of relaxation and leisure”. It would also cause problems for the employer, who would be storing up a liability to pay for large amounts of unused leave if the employment eventually ends due to sickness absence, and may struggle to organise work to cover the absence.

Instead, the ECJ says that collective agreements and national laws can provide for a cut-off point for any carry forward of annual leave, although that cut-off point must not be too short. As a guide, in Schultz-Hoff v Deutsche Rentenversicherung Bund [2009] EUECJ C-350/06, a carry-over period limited to six months was found to be too short, whereas the 15-month cut-off point in the Winifried Schulte case was judged acceptable.