The long-awaited House of Lords decision on the Stringer v HMRC case was issued on 10 June 2009. However the judgment did not deliver the expected outcome on long-term sickness and statutory annual leave. Pam Loch considers the case further.
The background
The House of Lords decision in Stringer and others (which includes Ainsworth) v HM Revenue and Customs followed a referral by the House of Lords to the European Court of Justice (ECJ) on the interpretation of the Working Time Regulations 1998 (WTR).
The ECJ judges considered two key issues in relation to statutory annual leave and sickness:
- Does a worker on sick leave accrue annual leave if they are not working ? The conclusion was yes but each member state should determine for itself whether or not the worker can take the leave when they are in fact off sick at the time.
- If a worker has not been able to use all their annual leave due to sickness, then they must be allowed to carry it forward and on termination they are entitled to be paid in lieu for any holidays accrued but untaken.
The referral followed a number of previous cases where the courts had reached different conclusions on these points. In Kigass Aero Components v Brown [2002] ICR 697, the EAT reached the same decision as the ECJ on holidays accruing during sick leave.
The Court of Appeal reached a different conclusion though, when it was deciding on similar issues in the Commissioners of Inland Revenue v Ainsworth and others [2005] IRLR 465, and the case was appealed to the House of Lords.
Why is the background important?
Unfortunately the referral back to the House of Lords from the ECJ did not produce the outcome most employment lawyers and HR professionals were expecting. Instead of a decision on the points remitted by the ECJ on sick leave and holidays, the House of Lords decision was on one specific issue that the Ainsworth claim had raised – does the failure to pay statutory holiday pay constitute a deduction from wages?
The short answer is yes, the Lordships’ opinions were unanimous in concluding that this was correct. The main affect of this decision is that if an employer breaches worker’s right to take statutory annual leave or to be paid for holidays under the WTR, the worker can bring a claim for unauthorised deductions in accordance with section 13 of the Employment Rights Act 1996 (ERA). The worker can then benefit from the tribunal being able to exercise its discretion to extend the three-month deadline for lodging a claim. The WTR deadline is a strict one.
Where does this leave us now?
To a large extent the Ainsworth complaint was a fairly straightforward one as he was seeking a payment in lieu of untaken holiday in respect of his last holiday year. The House of Lords did not have to consider more complicated questions, such as ‘must the worker take or try to take their holidays before they can be regarded as being owed the holiday pay?’
More importantly HMRC decided not to continue to pursue the case in relation to the accrual of sick pay during sick leave. The House of Lords decision therefore does not deal with those points.
Instead we are left with many of the complex questions still remaining unanswered. What is accepted by the judgment is that there is a right to accrue statutory holiday leave during sickness absence and an allowance in lieu of untaken holidays must be paid on termination. The EAT’s decision in Kigass therefore was restored by the House of Lords.
The main issues that remain unanswered are:
- Are workers required to take their annual leave or can a worker elect to take their leave during sick leave?
- Must workers be given the right to carry forward holidays that cannot be taken during sick leave even if this contravenes the employer’s policy?
More litigation on this is likely, most probably before clarity and certainty on these points is achieved.
Pam Loch is from employment law firm, Loch Associates and is managing director of HR Advise.me
