Forget the bustle of the Olympic Games – it’s been a busy time lately for the courts at all levels regarding the troublesome relationship between sickness absence and annual leave.
The latest development in this area is the Court of Appeal’s decision in NHS Leeds v Larner  EWCA Civ 1034. The Court decided that a worker, who has not taken paid annual leave because of absence from work on long term sick leave, is entitled to carry her untaken paid annual leave forward to the next leave year without making a prior request to do so. In other words, for workers on long-term sick leave, untaken holiday is automatically carried forward into the next holiday year.
This clearly reasoned decision resolves the inconsistency between previous Employment Appeal tribunal (EAT) decisions on this point.
Commenting that the general drift of previous relevant European Court of Justice rulings was “unmistakable”, the Court emphasised that a worker on sick leave is presumed to have no opportunity to take annual leave during the period of sickness. He or she must be afforded an opportunity to take that holiday at a later date - including in a later leave year if necessary.
There had previously been an EAT ruling to the contrary, in Fraser v. Southwest London St George's Mental Health Trust  IRLR 100. This case decided that a worker on long term sick leave had to request to take annual leave, or request carry-over of that leave, before the end of the relevant leave year in order not to lose that holiday. This was seemingly helpful to employers, it did not sit well with other decisions and so little reliance was placed on it. We now have a position that at least provides both employers and employees with certainty – no mean feat in this area of the law.
That said, the decision only deals with a worker’s basic four-week annual leave entitlement as laid out in the European Working Time Directive, not any additional leave to which a worker may be entitled in national law or under contract. However, it is arguable that reliance can be placed on a recent European case (Neidel v Stadt Frankfurt am Main  IRLR 607), which distinguished between the treatment of the basic entitlement and any additional leave.
On this basis, it seems that it currently remains open to employers to provide that untaken additional leave (currently an extra 1.6 weeks under the Working Time Regulations) will be forfeited at the end of a leave year.
The Larner decision can only contribute to the case for amending the UK Working Time Regulations, which currently prohibit carry-over of the basic annual leave entitlement. The Court of Appeal said that extra words could be read into the Regulations to give effect to this decision, but proper amendment of the Regulations themselves would be much clearer.
The Government’s current proposal (subject to consultation) is to allow workers who have not been able to take annual leave due to sickness absence to carry over just the basic entitlement of four weeks into the next leave year. This approach seems to be in line with recent European case law and now Larner as well. A change in the written law will be a move in the right direction towards honouring our European law obligations, and removing another source of inconsistency and confusion.
It is now clear that employers cannot keep quiet while an employee is on sick leave and hope that the employee fails to request to carry forward their holiday. Employees will accrue their annual leave while off sick and this will automatically be carried forward to the next holiday year if the employee hasn’t already taken it.
In order to avoid extensive carry-over for employees on long term sick leave, employers may want to alert employees to the fact that they can take their holiday during sick leave instead. Although they cannot force employees to do so, some may wish to do so – especially if they are on reduced or no pay. From the employer’s perspective, this may limit the costs if the employee is already receiving sick pay, or at least spread out the cost over a number of years.
A limit on the carry over period after a period of sickness is also worth considering, with recent European rulings having suggested that a limit of 15 months would be permissible. The Larner decision also expressly confirms that, once an employee has returned to work after illness, he or she will need to request to take carried-over holiday in the usual way.