The issue of holidays and sickness pay continues to plague and confuse employers with conflicting decisions from the ECJ and UK courts. The recent decision of NHS Leeds v Larner deals with payment for accrued holiday an employee is unable to take during a particular year by reason of sickness. This article reviews the decision in this case and examines holiday and sickness pay, current employment law and areas which remain unresolved.

NHS Leeds v Larner
The court reviewed whether an employee on sick leave for an entire leave year, who did not request any statutory holiday, is entitled to payment for their leave during that year upon the termination of their employment.
FACTS of the case

Mrs Larner, who worked for NHS Leeds as a clerical officer, went on sick leave on 5 January 2009 and did not return to work during that year. NHS Leeds terminated her employment by reason of capability in April the following year. Mrs Larner brought a claim for payment in respect of the statutory holiday pay she accrued, but not taken, during her sickness absence.

DECISION -

Employment Tribunal
The Employment Tribunal upheld her claim for holiday pay for the leave year 2009 – 2010. Mrs Larner did not bring a claim for the previous year as she had been receiving full pay under her contractual sickness provisions.

NHS Leeds appealed.
Employment Appeal Tribunal (EAT)
At the EAT, NHS Leeds argued that, as Mrs Larner had not requested to take holiday during her period of sickness absence, her entitlement had been lost for that year. NHS Leeds referred to the Working Time Regulations (“WTR”) under which there was a mandatory requirement for an employee to give notice of their intention to take holiday. It argued that in the absence of this “notice” no entitlement to holiday and consequently holiday pay arises.

The EAT considered that the key issue in this scenario was: whether Mrs Larner’s holiday entitlement for that year had been lost because she had failed to give notice that she wished to take that holiday.

In coming to its decision, the EAT considered an European Court of Justice (ECJ)* decision (see below) which led the EAT to decide that, as she had been off sick the entire year, Mrs Larner was not well enough to exercise her “right to enjoy a period of relaxation and leisure” during the year and nor did she have opportunity to take her statutory holiday. Accordingly, the EAT decided that her holiday leave was carried over into the next year (whether or not she formally requested to carry it over) and therefore she was entitled to be paid for her holiday entitlement upon termination of her employment.

The EAT commented that the case could have been different if the claimant was a healthy employee, and their holiday entitlement would be lost if they did not exercise their right to take it, especially if their contract so stipulated. The distinction here would be that the fit worker “had the opportunity” to take their holiday.
Comment and Practice Points

The EAT considered that Mrs Larner’s situation was comparable to the ECJ case of *Pereda v Madrid Movilidad SA [2009] (even though this was a case decided under European law without direct effect in the UK). In the Pereda case, the ECJ held that where a worker’s pre-arranged holiday coincided with a period of sick leave, that worker should be entitled to designate an alternative time to take that holiday even if that meant that it was carried over into the next holiday year.

Unfortunately, this case does not sit easily with the UK’s WTR, which does not permit a worker to carry over the first four weeks of their statutory holiday.

Whilst the WTR suggest that a worker’s right to take leave expires at the end of the year in question, EAT caselaw (including the NHS Leeds v Larner decision) suggests that the right to be paid for that leave does not (although this only arises on termination of employment).