News & Events
Employers get a warning on holiday pay for long-term sick
Updated 23rd July 2009
Employers are being warned to brace themselves for workers on long-term sick leave being entitled to accrue holiday pay while off work.
It follows a House of Lords decision interpreting a ruling by the European Court of Justice.
In what is being called the Stringer decision, an employee of HM Revenue and Customs brought a claim at his local employment tribunal seeking accrued holiday pay under the Working Time regulations and the UK Employment Rights Act.
Mr Stringer brought the claim even though he had remained on long-term sick leave and had exhausted his entitlement to both contractual and statutory sick pay.
His claim was lodged after his employer terminated his contract on the basis of his long-term sickness absence and refused to make payment to him in lieu of holiday entitlement during his holiday leave year.
His employers argued that they should not have to make a payment in lieu to an employee on long-term sick leave as they should not be entitled to accrue holiday pay. Not only did the Employment Tribunal find in favour of Mr Stringer but subsequent appeals by the Revenue to courts both in this country and Europe were unsuccessful.
Many employers, especially small ones, will no doubt view this landmark ruling as another blow dealt by the European Court and an unpopular decision at a time when many companies are struggling to run their businesses, often with limited resources in difficult trading conditions.
In real terms this means that future workers absent on a long-term sick leave will accrue annual leave that has to be paid for even though they are not actually working. Even if an employer decides to dismiss an employee who has been on long-term sick leave, they will have to make a payment in lieu of holiday accrued during the sickness period. Employment lawyers fear that unless employers take appropriate action they will face a rash of claims from employees who they previously believe were not entitled.
"A recent CBI report concluded that long-term absence in the work place accounted for a third of the total working time lost to absence each year"
Angela Protheroe, employment associate with Newport law firm Harding Evans, recommends that any employer with staff on long-term sick leave should take proactive steps now to protect their position.
She said: "This could range from updating contracts of employment and sickness absence policies - which could help limit an employer's exposure to the payment of holiday entitlement in excess of statutory holidays - to budgetary revisions to ensure that any necessary payments can be made in respect of those employees who may already be on long-term sick leave"
She added: "As an indicator of the potential ramifications of the Stringer decision, a recent CBI report concluded that long-term absence in the work place accounted for a third of the total working time lost to absence each year.
"In the current difficult economic climate many employers will probably feel that the European Court has not done them any favours with this decision."