Managing long-term sick: The position after Kigass and the entitlement to holiday pay

The recent decision of the Employment Appeal Tribunal in the case of Kigass Aero Components Limited -v- Brown has held that employees who have been off work due to long-term illness are nevertheless entitled to be paid up to four weeks statutory holiday under the Working Time Regulations 1998. However, the case leaves the management of employees on long-term sick far from certain.

In this decision, the EAT confirmed that those employees on long-term sick leave continue to accrue the right to be paid holiday, despite the fact that, given the length of their absence, they may have exhausted all other contractual rights to sick pay.

According to EAT and Kigass, a sick employee on asking to take his four weeks holiday will be entitled to four weeks’ pay. As such, each year, the employee will accrue and will be entitled to be paid for a further four weeks, even if he never attends work. Having once been able to maintain the long-term sick on the books at no extra cost, employers are now faced with this additional cost and may wish to reconsider whether to dismiss the employees for incapability due to their long-term sickness.

To maintain the status quo may involve not only the additional costs of the holiday pay but also a need to conduct a periodic review of the employees’ medical condition. It is arguable that an employer has an ongoing obligation to ensure that it is adequately considering what, if any, reasonable adjustment it should consider taking to comply with its obligations under section 6 of the Disability Discrimination Act (DDA). Clearly, there is a cost in both management and financial terms in keeping such employees on the books.

So should employers dismiss employees on long-term sick? Arguably, yes – although this will depend on the circumstances of each employee. A dismissal is not advised if this may invalidate an employee’s benefits under a PHI policy after the Aspden line of cases. Further, an employee is entitled to be paid in lieu of any holiday that has accrued but has not been taken as at the date of dismissal, though there is no right to have untaken holiday carried over from one defined holiday year to the next.

Therefore, if an employer is to dismiss it should do so at the beginning of the employer’s defined holiday year so as to minimise the holiday entitlement which the employee has accrued but not taken, thus reducing the cost to the employer of any payments in lieu of holiday entitlement. Care will also be needed to ensure that the dismissal is not only justified but also that there were no reasonable adjustments that could have been made for the purpose of the DDA. It may be arguable that in certain circumstances one such reasonable adjustment would be to maintain the employee on the books. Dismissal will also need to be undertaken fairly. Not only will this involve appropriate consultation with the employee but also the employer would have to argue that the dismissal was reasonable in circumstances where there is no commercial requirement for the employer to remove the employee off the books.

Despite the apparent enhancement of long-term sick employees’ rights as a result of the Kigass decision, the case may well backfire in that dismissals are much more likely. From a policy perspective the Kigass decision makes little sense and there have been calls to change the law to reverse the decision, not least from the Judge in Kigass itself.
This document is for general guidance and research purposes only, and does not purport to give professional advice. Please check the date at the top of the article; the Workplace Law Network retains historic articles for general research.