Holiday entitlement in the spotlight

1 September 2009

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As it is the holiday season, we put the spotlight on holidays and offer practical advice when dealing with some of the technical or legal issues concerning holiday entitlement. In the first of this two-part article, we look at long-term sick leave and holidays during maternity leave.

Long-term sick leave and holiday rights - HMRC v Stringer

It was hoped that the House of Lords' decision in Stringer would provide answers to the difficult issues which have arisen about the accrual and payment of annual leave during sick leave and whether it is carried over to subsequent years in cases of long term sickness absence.

Unfortunately almost all the key questions about this remain outstanding. However, the current position appears to be as follows:

Statutory holiday entitlement accrues during periods of sick leave
Payments in lieu of untaken statutory holiday on termination are unaffected by sickness absence
The Working Time Regulations (WTR) should (probably) be interpreted as allowing workers to take paid statutory holiday during periods of long-term sick leave.

This outcome will lead to additional costs for employers, as workers on long-term sick leave who have used up their sick pay will be able to continue to accrue leave, (although we await a case to see if this is correct) will be entitled to request and be paid for statutory holiday taken whilst off sick, and will be entitled to payment for accrued leave when their employment ends.

Although changing policies and procedures may be premature, it is advisable to permit employees to take paid annual leave during sickness absence.

Maternity leave and carrying over holiday

Maternity leave will frequently span two leave years. According to the WTR, women on maternity leave may lose some of their holiday entitlement if their leave extends into a new leave year, as the WTR do not permit statutory leave to be carried over into the next leave year.

Consequently, employers may justifiably insist that such leave is lost to the extent that it cannot be taken during the leave year in which it accrued. However, this issue remains unclear and we will need to await future case law.

Given the potentially large amounts of holiday at stake you could encourage the worker to use up her holiday entitlement immediately before going on maternity leave or on her return from maternity leave.

If the worker still does not use up her holiday before the year ends, you may wish to apply your normal rules on carrying forward holiday entitlement, even if this results in the employee losing some holiday. The "safer" approach would be to allow carry over of all outstanding but untaken leave.

Designated holidays and "shutdowns" during maternity leave

Employers often identify particular days on which all workers must take paid leave. These include Christmas shutdowns and bank holiday closures. This can cause those on maternity leave to fear that they are losing out on paid leave.

The general rule is that terms related to "remuneration" are suspended during maternity leave. There does not appear to be any reason why holiday pay would be any different to other forms of "remuneration".

Workers may therefore "lose out" on contractual paid leave as a result of compulsory shutdown during maternity leave.

However, the right to statutory annual leave is preserved. In Merino Gomez v Continental Industries del Caucho, the European Court of Justice held that an employer could not designate as holiday (for the purposes of the Working Time Directive) a day when a worker was already on maternity leave.

Where there is a general shutdown during a woman's maternity leave period, you should ensure that the worker still has the right to the full statutory annual leave (now 5.6 weeks per year) outside her maternity leave period.

About the author

This article was prepared by the FPB's legal advisers, Mace & Jones Solicitors. For more information on Mace & Jones visit www.maceandjones.co.uk

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