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Holiday pay and sick leave - the last word?

In Sood Enterprises Ltd v Healy the EAT considered whether additional annual leave can be carried forward in the absence of an agreement between the parties.

Background

The Working Time Directive (the Directive) obliges member states to provide that every worker is entitled to paid holiday of at least four weeks per year.

The Working Time Regulations (the Regulations) implement the Directive and provide that a worker is entitled to 5.6 weeks annual leave (i.e. 28 days per year for those who work five days per week). The 5.6 weeks comprises:

  • four weeks annual leave (i.e. 20 days) (Reg 13(1)) which represents the minimum under the Directive; and

  • an additional 1.6 weeks (i.e. 8 days) (Reg 13A)

Reg 13A(7) provides that an agreement between the parties may provide for the additional 1.6 weeks to be carried over to the following leave year provided that the leave is not replaced by a payment in lieu except on termination.

In NHS Leeds v Larner the Court of Appeal held that workers who were unable to take holiday leave because of sickness were able to carry over that entitlement, notwithstanding Reg 13(9) which provides that the first four weeks of statutory holiday leave may only be taken in the leave year in which they are due and may not be replaced by a payment in lieu except on termination of employment.

However, in Larner the court did not address the issue of the additional 1.6 weeks provided for by Reg 13A. This issue was considered by the EAT in the case reported below.

Facts

Mr Healy worked for Sood Enterprises Ltd (Sood). He suffered a stroke in July 2010 and did not return to work before he resigned in June 2011.

His absence straddled two holiday years (which ran from January to December). Mr Healy had taken 11 days holiday in 2010 (leaving 17 days). His holiday entitlement for 2011 (pro-rated to his termination date) was 14 days.

The Employment Tribunal held that Mr Healy was entitled to be paid in lieu of untaken holiday for both years.

Sood appealed to the EAT on the grounds that the 1.6 weeks additional holiday pay could only be carried over if there was an agreement between the parties, which there was not.

Decision

The EAT upheld the ET's decision in respect of Mr Healy's claim for payment for the 14 days under the 2011 leave year.

However, it found that whilst Mr Healy was permitted to carry forward the statutory four weeks leave from 2010, he was not entitled to carry forward the additional 1.6 weeks. The EAT confirmed that the Regulations provide that additional holiday entitlement may only be carried over if there is an agreement between the parties.

Accordingly, the EAT reduced Mr Healy's entitlement for 2010 from 17 days to 9 – i.e. 20 days entitlement (as opposed to 28) less the 11 taken days.

Comment

Employers will welcome the clarification provided by this decision which deals with the question left unanswered by Larner. It is now clear that employees who are unable to take holiday leave due to sickness are only entitled to carry forward the entitlement to four weeks provided by Reg 13. In such circumstances, and in the absence of an agreement between the parties to the contrary, the employee's entitlement to the additional 1.6 weeks will be lost.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at August 2013. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.

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