Staff on long-term sick leave must be given paid holiday
12 Jun 2009
Employees who lose holiday pay while on sick leave will be allowed to claim compensation for unauthorised deduction from their wages following a new House of Lords ruling.
The decision was in response to an earlier European Court of Justice (ECJ) judgment that employees are entitled to paid holiday for their whole period of absence and can take this when they return, or accept payment in lieu if their employment ends.
The House of Lords had to decide how the ECJ judgment would fit in with UK legislation in light of the Working Time Regulations that say employees lose any holiday entitlement that is not taken within 12 months.
The House of Lords resolved the issue by ruling that the ECJ judgment overrides the Working Time Regulations.
“Employers will clearly want to know the how the ruling will affect them,” said Latham Parry, Associate Solicitor at Rowlands. “Organisations with staff on long term sick leave should let them accrue at least the four weeks statutory holiday stipulated by the Working Time Directive.
“Staff should then be given a choice, either to specify a period of absence to be considered as holiday, for which they will receive holiday pay; or to carry forward any holiday owed from one leave year to another. If this has not been taken before the end of their employment, they must be paid in lieu.
” As a result, businesses with staff on long term sick leave face major cost implications.
“Employees can now benefit from the more generous time limits applying to unlawful deduction claims,” explained Latham Parry.
“Working Time Regulations say that a claim can be back-dated no more than three months. However, the new ruling means that a worker can go back much further with an unlawful deduction claim, if the employer has failed to make holiday payments on a number of occasions and the claim is made within three months of the most recent failure.
” In a worst case scenario for employers, employees can now take holidays for many years, which they were not previously allowed, or claim payments if their request is turned down.
Latham Parry added: “The immediate upshot of this judgment is that the cost of continuing to employ people on long term sick leave will rise considerably. Nonetheless, employers should avoid dismissing staff in this category unless they have taken professional legal advice, because case law imposes substantial limitations on such action.”
The decision was in response to an earlier European Court of Justice (ECJ) judgment that employees are entitled to paid holiday for their whole period of absence and can take this when they return, or accept payment in lieu if their employment ends.
The House of Lords had to decide how the ECJ judgment would fit in with UK legislation in light of the Working Time Regulations that say employees lose any holiday entitlement that is not taken within 12 months.
The House of Lords resolved the issue by ruling that the ECJ judgment overrides the Working Time Regulations.
“Employers will clearly want to know the how the ruling will affect them,” said Latham Parry, Associate Solicitor at Rowlands. “Organisations with staff on long term sick leave should let them accrue at least the four weeks statutory holiday stipulated by the Working Time Directive.
“Staff should then be given a choice, either to specify a period of absence to be considered as holiday, for which they will receive holiday pay; or to carry forward any holiday owed from one leave year to another. If this has not been taken before the end of their employment, they must be paid in lieu.
” As a result, businesses with staff on long term sick leave face major cost implications.
“Employees can now benefit from the more generous time limits applying to unlawful deduction claims,” explained Latham Parry.
“Working Time Regulations say that a claim can be back-dated no more than three months. However, the new ruling means that a worker can go back much further with an unlawful deduction claim, if the employer has failed to make holiday payments on a number of occasions and the claim is made within three months of the most recent failure.
” In a worst case scenario for employers, employees can now take holidays for many years, which they were not previously allowed, or claim payments if their request is turned down.
Latham Parry added: “The immediate upshot of this judgment is that the cost of continuing to employ people on long term sick leave will rise considerably. Nonetheless, employers should avoid dismissing staff in this category unless they have taken professional legal advice, because case law imposes substantial limitations on such action.”
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