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Sickness and holidays - the impact for the retail sector


The vexed issue of the relationship between sickness and holidays has been a troublesome headache for retailers and other employers alike. High profile cases and conflicting provisions in the European Working Time Directive (“WTD”) and the UK’s Working Time Regulations (“WTR”) have resulted in this area being riddled with uncertainty.

The principle reason for the confusion is that, under the WTR, the carry-over of statutory holiday into the next leave year is expressly prohibited. However, this conflicts with a decision from the Court of Justice of the European Union (“CJEU”) (Pereda v Madrid Movilidad SA), which established that under the WTD, where a worker’s pre-arranged holiday coincides with sick leave, workers can take their holiday at a different time or carry it over to the next year. Since Pereda, Employment Tribunals have been interpreting the WTR to allow carry-over of accrued statutory holiday.

A further sticky issue was resolved by the Court of Appeal in the case of NHS Leeds v Larner - whether sick workers must request that holiday be carried forward to the next holiday year in order not to lose that entitlement. The Larner decision provided some clarity by confirming that employees continue to accrue statutory holiday on sick leave and are entitled to carry untaken annual leave forward without making a prior request to do so.

Employers were then faced with an additional dilemma: was there any time-limit on carry-over of holidays? The CJEU decisions in KHS AG v Schulte and Neidel v Stadt Frankfurt am Main suggested that there was. These decisions stated that carry-over may be limited to a specific period of time after the end of the leave year, but the period needs to be ‘substantially’ longer than the reference period to which it relates. The benchmark from these decisions seems to be that carrying over for 15 months after the end of the relevant leave year would be permissible, but 9 months would be too short.

So what’s the current position? It is now clear that workers accrue their statutory annual leave while off sick and unused leave will automatically carry over to the next holiday year. Retailers are therefore advised not to remain silent on the tricky issue of holidays with a worker on long-term sick leave, in the hope that the worker will not make a request to take or carry over leave and it will be lost.

The government’s Modern Workplaces Consultation is currently considering how to amend the WTR to deal with the issue of holiday and sickness and bring it into line with the WTD and CJEU decisions. Until the response to the consultation is published, the Larner decision has provided some useful clarification. Whilst Larner did not expressly deal with whether the principle applies to holiday over and above the basic 4 weeks’ statutory entitlement under the WTD, it is worth noting that the consultation currently proposes that employers would not be obliged to allow carry-over of the additional 1.6 weeks’ leave provided under the WTR.

Top tips for retailers

• consider highlighting to workers on long-term sick that they may take their holiday during their period of sickness absence. Although workers cannot be compelled to take their holiday at this time, it might be an attractive option for some - especially those that have exhausted their sick pay entitlement or are on reduced pay.

• if a worker returns to work before the end of a holiday year then, provided that there is sufficient time remaining before the end of the holiday year, the employer can require them to take some or all of their accrued holiday.

• monitor sickness absence so that it is easier to identify abuse. Make workers aware that abuse of the employer’s system could lead to disciplinary action being taken against them.

• consider only permitting carry-over of the basic 4 week entitlement under the WTD and not the additional 1.6 weeks under the WTR, as suggested by the government’s Modern Workplaces Consultation. However, retailers should note that the government’s position in relation to this may change.

Published on Tuesday 07 January by Editorial Assistant

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