Sickness Absence and Holiday Pay

The problem

Arhh, that old chestnut! Sure enough, there has been another decision on the issue of what holiday pay is due to employees who have been off work on long term sickness absence.

 The principle

 In the case of Sood Enterprises v Healy (UKEATS/0015/12) the EAT had to consider whether annual leave, of a long term absent employee, can be carried forward in the absence of an agreement between the parties.

By way of background, the Working Time Regulations 1998 note the following:

• A worker is entitled to 5.6 weeks’ annual leave (equivalent to 28 days for those who work five days a week) in each leave year. This is made up of the right under European provisions to a minimum of four weeks’ annual leave (20 days) each year (regulation 13(1)) and an additional 1.6 weeks’ annual leave (8 days) (regulation 13A).
• The first four weeks’ statutory holiday may only be taken in the leave year in respect of which they are due, and may not be replaced by a payment in lieu except on termination of employment (regulation 13(9)).
• A relevant agreement may provide for the remaining 1.6 weeks’ leave to be carried over to the next leave year provided that such leave is not replaced by a payment in lieu except on termination of employment (regulation 13A(7)).

In this case Mr Healy was off sick for 18 months before resigning. He claimed unpaid holiday pay but the EAT accepted Sood’s appeal that ‘additional leave’ cannot be carried forward into the next holiday year (thereby limiting the liability on Sood to pay for accrued but untaken holiday).

The practice

In practice this means an employee on long term sickness (straddling holiday years) will only be able to carry over 4 weeks (20 days) untaken holiday (or be paid for it on termination) and not the additional 1.6 weeks (8 days) granted by UK law.

In the overall scheme of things, this line of case law is still not good news for employers but at least a degree of certainty is emerging around an employee’s entitlements. We suggest you check your holiday policies to ensure there is no arrangement (or “relevant agreement”) which would allow employees to carry over and claim the additional 1.6 weeks of leave as well.

For further information, help or advice please contact Tim Davies on 0191 211 7927.