Case law: workers’ paid holiday rights while on long-term sick leave

By: Aengus Collins

Date: 15 July 2009

Businesses must take note of a recent decision of the House of Lords, applying a European Court of Justice (ECJ) ruling on the holiday rights of workers on long-term sick leave.

In this long-running case, all the workers had been employed by HM Revenue & Customs (HMRC), and brought proceedings under the Working Time Regulations 1998 (WTR) for unfair dismissal. Earlier this year, the ECJ ruled that a worker is entitled to paid annual leave during the time that he has been on sick leave; where he remains unable to work until the end of his employment relationship, he is entitled to an allowance in lieu of the paid annual leave, to be paid at his normal rate of pay.

Giving its decision in this case, the House of Lords overturned the decision of the Court of Appeal from 2005, and ruled, in accordance with the ECJ ruling, that the workers were entitled to be paid for annual leave that accrued while they were on sick leave, on the basis that their claims for failure to pay under the WTR could be treated as a claim for unlawful deduction from wages under the Employment Rights Act 1996, which provides for a longer time-limit for bringing a claim. While this decision will inevitably increase costs for employers who find themselves in this situation, businesses must not be tempted to dismiss employees on long-term sick leave or they risk facing claims of unfair dismissal and, potentially, disability discrimination.

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