Stringer v HMRC - The House of Lords rules

01/07/2009

By Nick Hobden, Partner and Head of Employment.

The House of Lords has just recently given its judgment in the case of Stringer v HMRC.

We had hoped that this would clarify the law regarding sickness absence and annual leave. This decision comes after the case was previously referred to the European Court of Justice (ECJ), which ruled on the matter in January of this year.

The ECJ concluded that the entitlement to 4 weeks' annual leave (the European-wide guaranteed minimum holiday entitlement) continues to accrue during periods of sickness absence. But it went on to say that it was for Member States to decide whether or not workers could actually take annual leave during sick leave. The ECJ pointed out that if a Member State does not allow workers to take the minimum leave entitlement during sick leave, they must have the right to carry it over to a subsequent leave year. Following the ECJ judgment, HMRC conceded that annual leave could be taken during sick leave. So the House of Lords did not get the chance to declare where English law stood on this point.

Given that the Working Time Regulations (WTR) require annual leave to be taken in the year in which it accrues, the WTR could be interpreted as entitling workers on sick leave to take annual leave. If workers on sick leave do have the right to take annual leave, then a failure to do so could mean that the accrued but untaken leave is lost if not taken. After all, this is the rule that typically applies to healthy workers. But for now, this issue remains undecided. It is unfortunate that the House of Lords did not get the chance to consider this point. We await further case law in order to clarify the situation.

On a slightly separate note, the ECJ also ruled that the right to be paid in lieu of accrued but untaken holiday on termination of employment applies even if the worker has been on sick leave for all or part of the leave year.

The only issue left for the House of Lords to consider was whether a failure by an employer to pay holiday pay (or a payment in lieu of holiday on termination) will amount to an unlawful deduction from wages under the Employment Rights Act 1996. The House unanimously decided that it did. Whilst the WTR would normally require a claim for underpayment of holiday pay to be made within 3 months of any particular underpayment occurring, the time limit for bringing a claim for an unlawful deduction from wages in the Employment Tribunal is three months from the date of the last of a series of connected deductions. This means that where a worker feels that he has not been paid the right amount of holiday pay over a lengthy period of time, he may be able to claim in respect of each of these alleged deductions, even if they happened many months (if not years) ago.

Because the House of Lords was not required to rule on all the issues thrown up by the ECJ decision, the precise detail of the law in this area is still rather uncertain. However employers should consider very carefully the position of any of their staff who have been off work on long term sickness absence. If in doubt, we are on hand to provide advice.