Landmark decision finds holiday can be accrued whilst on sick leave

The House of Lords has ruled that workers on long-term sick leave do have the right to accrue holiday. The landmark decision, which was made this morning, is the final stage in a long-running argument about holidays and sickness absence in the case of Stringer v. HMRC.  

The case raised the issue of whether or not a worker can continue to accrue annual leave whilst on sick leave and, if so, whether that leave can be taken whilst the worker was on sick leave. It hinged on previous employees of HMRC, one of whom had sought to take annual leave during a period of sick leave but was prevented from doing so. The other three had been absent on sick leave and were then dismissed. They had not taken any holiday while on sick leave and, upon termination, sought payment in lieu for outstanding holiday. HMRC said they were not entitled to payment as they had been on sick leave.

Although the UK Employment Tribunal and Court of Appeal had found that people had to take their holiday each year, and if they were on sick leave they didn’t get holidays as well, the European Court of Justice determined in January that the UK was wrong.

According to the decision, any workers who are denied holiday pay could pursue a claim to an Employment Tribunal for unlawful deduction from wages, explains Caroline Carter, Head of Employment at law firm, Ashurst.

"The Stringer decision has provided clarity in the sense that it confirms that employees can bring a claim for unpaid holiday pay as a claim for unlawful deductions from wages, or under the Working Time Regulations (at the employee's option).”

However, she warned, there is still a good deal of uncertainty that remains for employers, in relation to how to manage employees’ entitlements to annual leave whilst they are absent on sick leave.

“Employers may be able to limit their exposure by ensuring that employees take their holiday entitlement during the relevant leave year, even if they are off sick at the time when some or all of the leave needs to be taken. They may also be able to get an employee’s consent to not receive holiday pay, particularly where the employee is already in receipt of sick pay and/or benefits under a PHI scheme. This would prohibit employees from bringing unlawful deductions claims, a valuable achievement for employers as these claims could potentially stretch back over many years (unlike claims under the WTR). Above all, employers will need to carefully review their sick leave policies and work closely with their legal advisers to devise a scheme that takes account of the House of Lords decision whilst minimising exposure and the risk of future claims."