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Holidays and sickness absence

Posted on 19th December 2011
Case law

Continuing the case law on the subject, the European Court of Justice has ruled that entitlement to holiday while on sick leave does not accrue indefinitely.

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it is lawful to limit the period of carry-over of annual leave for a worker absent on sick leave

Schulte v KHS AG

Background

Mr Schulte (S) was employed in Germany by KHS AG (KHS). In January 2002 he suffered a heart attack and was absent until he was dismissed on 31 August 2008. He claimed payment in lieu of accrued annual leave for the leave years 2006 to 2008.

Under German law annual leave could be taken in the calendar year. In certain circumstances, annual leave not taken in the calendar year could be carried over and taken within a period of three months after expiry of the calendar year. Where annual leave could not be taken due to sickness, the carry-over period increased by a further 12 months, giving a total carry over period of 15 months. The European Court of Justice (ECJ) was asked to decide if this was lawful.

Decision

In short, the ECJ concluded that it is lawful to limit the period of carry-over of annual leave for a worker absent on sick leave to a maximum of 15 months after the expiry of the annual leave year.

In reaching its decision it took into account a number of factors:

  • "Annual leave has the purpose of "enabling the worker both to rest from carrying out work he is required to do under his contract ... and to enjoy a period of relaxation and leisure".
  • "The right to paid annual leave acquired by a worker who is unfit to work ... can reflect both aspects ... only in so far as the carry-over does not exceed a certain temporal limit".
  • "A worker who is unfit for work ... cannot have the right to accumulate, without any limit, entitlements to paid annual leave".
  • "The carry-over period must also protect the employer from the risk that a worker will accumulate periods of absence of too great length and from the difficulties for the organisation of work".

Comment

The decision is eminently sensible and, on the face of it, offers employers some much needed reassurance that workers who are off sick do not accrue annual leave entitlements for an indefinite period. This could impact upon both the holiday entitlement of the worker (if and when they return to work) and any payments which may need to be made on termination.

The decision is based on German law which is not even remotely mirrored in the Working Time Regulations. The decision does not therefore have a direct impact, but will almost certainly assist in persuading employment tribunals that the Working Time Regulations should be interpreted to permit carry-over of annual leave for a period of no more than 15 months after expiry of the applicable annual leave year.

The government's proposals for reform of the Working Time Regulations are still awaited! Pending any amendment of legislation, employers may wish to consider amending their own rules and provisions relating to holiday. We would be happy to review them with you and consider what - if any - interim measures you can take.

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