Annual leave and sickness absence

Sood Enterprises Ltd v Healy [UKEATS/0015/12/BI]

The Working Time Regulations 1998 (‘the Regulations’) give a worker 5.6 weeks’ paid annual leave.  This is made up of four weeks’ annual leave under regulation 13 (‘normal annual leave’) and an additional 1.6 weeks’ annual leave under regulation 13A (‘additional annual leave’).

Under the Regulations, normal annual leave can only be taken in the leave year it is due and is paid in lieu when employment ends.  Additional annual leave can be carried over by agreement between the worker and the employer.

Mr Healy became ill in July 2010.  He did not return to work before he resigned on 6 June 2011.

Sood Enterprises’ holiday year was the calendar year.  Mr Healy and Sood Enterprises had not entered into any agreement allowing carryover of additional annual leave.

Mr Healy was therefore absent for part of the holiday years 1 January 2010 to 31 December 2010 and 1 January 2011 to 31 December 2011. A conversation took place about holiday in either December 2010 or March 2011.  Mr Healy wrote in April 2011 asking for payment of his holiday pay for 2010 and 2011.  Sood Enterprises responded that no payment could be made unless his employment came to an end.  Mr Healy resigned.

Mr Healy had taken 11 days in 2010 and none in 2011.  Sood Enterprises wrote to Mr Healy and advised he was due 6 days’ holiday pay and this would be paid.  It was not.  Mr Healy brought a claim for payment in lieu of holiday on termination under the Regulations.

The parties agreed that accrued but untaken holiday, taking into account normal and additional annual leave, for the holiday year 2010 was 17 days and for 2011 14 days.

The EAT said there was a distinction between normal and additional annual leave and how the carryover rule worked.

Normal annual leave was carried over for the 2010 holiday year in accordance with existing case law and Mr Healy was entitled to receive a payment in lieu of it.  The EAT concluded, however, that additional annual leave for the 2010 holiday year did not.  The reason for this was that Mr Healy and Sood Enterprises had not entered into an agreement that allowed Mr Healy to carryover additional annual leave.  This meant Mr Healy was only entitled to 9 days for 2010.

In relation to 2011, the annual leave year in which his employment came to an end, Mr Healy was entitled to be paid in lieu for both his accrued normal and additional annual leave.

Holiday entitlement during periods of sickness has been a constant source of confusion arising from case law developing piecemeal and leaving questions unanswered.  It’s possible that this case is the end of it, apparently wrapping up the last lose end.

In practice normal annual leave will generally carryover so that the worker is entitled to take this leave if they return to work after the sick leave or tht worker must be paid in lieu when his or her employment ends.  Additional annual leave will only carryover if the worker and employer have reached an agreement that this will be the case.  The agreement can be an individual, workforce or collective agreement.

It is also important to note that the EAT made the point clearly in this case that the recent case law applies to public sector and private companies alike.  Whether you are public or private sector employer it is clear that you should make payments of, at the very least, normal annual leave accrued during periods of sick leave whether in the current or previous holiday years.  Additional annual leave is another story.  Our experience is that few employers have an agreement which allows carryover (and therefore requires payment) of additional leave.  You will need to check each time.  If you do, you may want to consider your options to remove the additional expense.