A landmark case over holiday pay for the long-term sick could not only prove costly for employers but also raises as many questions as it answers, according to legal experts.
Yesterday, the Court of Appeal ruled that Janet Larner, a part-time clerical worker at NHS Leeds, was entitled to paid leave for the financial year 2009/10 during which time she was off sick.
Larner had worked at the Trust since 2000 and went off on sick leave in January 200, but never returned and was dismissed in April 2010. The compensation package that she received did not include her untaken leave during 2009/10, however, on the grounds that she had neither requested it nor asked that it be carried forward.
But her lawyers argued that she had been too ill to take – or even think about – holidays that year, a point of view that was subsequently upheld by an employment tribunal, the employment appeal tribunal and now the Appeals Court.
But Chris Wellham, Of counsel in the employment team at law firm Hogan Lovells, warned that the ruling could prove to be an expensive one for employers.
“Allowing long-term sick employees to carry leave forward automatically and to be paid for all the leave that has accrued on termination of employment could be very costly for employers,” he said.
The problem was that it opened the way for employees taking long-term sickness leave to claim holiday pay for the whole period of their absence as and when their employment ended. For a staff member who had been off sick for two leave years, for example, the figure could represent nearly three months’ pay, he added.
But there were also a number of unresolved issues that the case had brought into sharp relief, said Kate Hodgkiss, a partner in DLA Piper’s employment group. Such matters included whether the right to carry forward holiday applied to an additional 1.6 weeks of statutory holiday conferred by the WTR.
Unresolved issues
“Although an ECJ case (Neidel) suggested that it would not, the UK tribunals have already taken a different approach and applied carry-over to the entire 5.6 weeks, and not simply the four weeks required by the Working Time Directive,” she explained.
While the Appeal Court had refused to make a direct finding on this point as it had not been raised by the lower courts, it did indicate that the Neidel judgement should be taken into consideration in future cases.
But there was also the matter of how long the right to carry over holiday lasted, which the Court of Appeal had likewise failed to address, Hodgkiss pointed out.
“Although Schulte indicated that any limitation on carry-over would have to be significantly longer than the reference period in which the holiday had to be taken (ie longer than a year), employers still have no certainty on this point and, therefore, potentially remain liable for indefinite carry-over of holiday,” she explained.
As part of its Modern Workplaces consultation, the government was considering whether to amend the Working Time Regulations to make them clearer and to resolve current conflicts in case law. But the outcome had still not been made public and so the situation remained unclear.
What this all means in practice, said Hodgkiss, was that employers should start reviewing their employment contracts, policies and procedures in order to minimise holiday liabilities as much as possible.
Such activity included tightening up the drafting of employment documents to make it clear that carry-forward only applied to statutory holiday (possibly restricting this to four weeks) and not enhanced contractual holiday.
It likewise entailed making clear that statutory holiday was always to be taken before any other kind in order to reduce the amount that employees could carry over if on sick leave, Hodgkiss said.
