Important judgment on the accrual of holiday during long term sickness

When a worker is absent for a long time on ill health grounds, do they keep accruing annual leave whilst they are away?

When a worker is absent for a long time on ill health grounds, do they keep accruing annual leave whilst they are away? Do they have to be paid for it all when they leave your employ? An important Judgment of the Employment Appeal Tribunal has provided us with some clarity about the answers to these questions (at least for now). The Judgment in Plumb v Duncan Print Group Ltd contains both good and bad news for employers.

The facts

Mr Plumb had an accident in April 2010 and was absent from work until his employment ended in April 2014. He brought a claim for the pay in lieu he said he should have received for accrued but untaken annual leave in the years 2010-11; 11-12; and 12-13. His employer paid him in lieu for the leave accrued in 2013-14 and the year in which he left, so those years weren’t part of the claim. 

The Employment Appeal Tribunal has awarded Mr Plumb pay in lieu for the annual leave accrued in the 2012-13 year, but not for the previous leave years. In doing so they have made two rulings which will be important for many similar cases: 

  • A worker who is absent from work on sick leave is not required to demonstrate that he is physically unable to take annual leave by reason of his medical condition, in order to be able to carry forward the accrued annual leave to future years; and 
  • EU law does not require such leave to be carried forward indefinitely so such accrued annual leave is "only" carried forward 18 months from the end of the leave year to which it relates. If not taken or paid for within that period the leave is lost. 

What does this mean for me?

Following previous Judgments we have known that annual leave must accrue whilst a worker is absent on ill health grounds and that it will (exceptionally) be carried over to subsequent leave years if not taken, where the worker is unable or unwilling to take it. In this case the employer had successfully argued before the Employment Tribunal that Mr Plumb was able to take holiday as his condition (a serious shoulder injury) was not so bad that he couldn't do so. The EAT has firmly overturned that finding and ruled out the possibility of similar arguments in the future. The Judgment says that when a worker is absent on ill health grounds they are not required to do anything, or demonstrate how ill they are, to carry annual leave over to another year - it just happens.                

This means that any worker on sick leave at the end of your holiday year must be allowed to carry over any accrued but untaken annual leave (which they have been unable to take) to the next leave year. Importantly this Judgment is about the four weeks minimum leave required under European law (in many cases being 20 days) and not a higher amount, so you might be able to distinguish between that leave and the 5.6 weeks UK leave or any additional contractual amount.

The second point of the decision does however provide a welcome and pragmatic limitation upon this accrual of leave. For those workers with very long periods of ill health absence it helpfully caps the potential accrual of annual leave and the cost of it when employment terminates. This may be particularly important to those employers with permanent health insurance. If you do face claims from employees for accrued annual leave following years on PHI, take advice. However this Judgment does clearly limit the amount of accrued holiday that such workers can claim.

If terminating the employment of someone who has been off on ill health grounds long term, there will be occasions when it is sensible to do so in the second half of your leave year. The worker may still be able to argue for payment in lieu of annual leave accrued in their final year and the one before, but will not then be able to argue for accrued leave from previous leave years.

Comment

This Judgment is another example of the EAT finding for workers on annual leave, but at the same time restricting the monetary impact of their ruling and the windfall workers might otherwise receive. However this ruling is limited to accrual of annual leave when a worker is absent on ill health grounds. It does give us a degree of certainty for now, but leave to appeal to the Court of Appeal has been given. The findings are based upon complex arguments about the interrelation of EU and UK law and unusually incorporates the time limit from an International Labour Organisation Convention, so it is far from certain that these findings will be upheld should such an appeal proceed.


If you would like to discuss in more detail the implications of this Judgment for your organisation or have any questions about holiday pay, please speak to your usual contact in the Weightmans employment, pensions and immigration team, or get in touch with Phil Allen phil.allen@weightmans.com.

You can also follow us on Twitter @Weightmans_Empl

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