Today's unanimous decision by the House of Lords on the interpretation of the Working Time Directive is likely to have costly practical implications for employers dealing with workers on long term sick leave, says national commercial law firm Beachcroft LLP.

Consistent with the prior decision of European Court of Justice, the House of Lords decided that workers who are on sick leave may be entitled to accrue statutory holiday pay; carry over unused holiday entitlement from one holiday year to the next if they have not been able to take their holiday entitlement because of sickness absence; and receive pay in lieu of any unused holiday entitlement at the end of their employment.

Rachel Dineley, Head of the Diversity and Discrimination Unit at law firm Beachcroft LLP, said: "Today's decision may cost employers dearly. They need to assess the prospective liabilities they may have in respect of employees on long term sick leave and the risks they now face of claims. This is far easier said than done. The House of Lords has left a number of key questions unanswered. Only further case law will resolve some of these issues, which have been ongoing for several years already.

"There may a temptation for some employers to resort to dismissing those on long term sickness absence sooner rather than later, in order to limit those liabilities. There are very clear drawbacks in such an approach, not least being the requirements of the Disability Discrimination Act (and the proposed changes arising under the Equality Bill). Employers and insurers who provide income protection will wish to review the nature and extent of their cover in light of today's decision.

Whatever action they take, employers must be careful to follow the correct procedure or they could be faced with claims for unfair dismissal, disability discrimination and for loss of income protection benefits for their staff."

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For further comment, please contact Vanessa Montero or Julia Dudley by e-mail on pressoffice@beachcroft.co.uk or by phone on 020 7894 6655.

Publication Date: 10 Jun 2009