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  • Overview

    By Susanna Gilmartin, Partner in Employment.

    A few years ago, everyone seemed to be rather preoccupied with the question of precisely how to deal with the accrual of holiday, when an employee is on long term sick leave. Various cases on this subject were widely reported and whilst a number of questions remained unanswered, something like a consensus arose regarding how to deal with such situations.

    Well now seems like a good time to reflect on this issue, bearing in mind the decisions in two recent cases; one in the Employment Appeal Tribunal and the other in the European Court of Justice.

    Fraser v Southwest London St George’s Mental Health Trust

    In the case of Fraser v Southwest London St George’s Mental Health Trust, after a period of sickness absence spanning a number of years, Ms Fraser was dismissed from her job as a nurse. She was paid in lieu of the holiday that she had accrued during the holiday year in which her employment terminated. But she received nothing in relation to the two preceding years, during which she had been absent from work and had not taken any holiday. She brought a claim, alleging an entitlement to further holiday pay in respect of these two years. In response to her claim, her employers agreed that Ms Fraser had accrued holiday during her sickness absence. But they argued that as she had not asked to take any holiday, that holiday had been lost. 

    The EAT judge considered the law in this area and concluded that payment for annual leave under the Working Time Regulations 1998 normally only arises in respect of leave actually taken. The judge also acknowledged that an employer could reasonably adopt a ‘use it or lose it’ approach to holiday, such that an employee could not, on termination of employment, claim pay for holiday that might have accrued in an earlier holiday year.

    The judge accepted that case law established the potential right for an employee on sick leave either to (i) take paid holiday whilst sick or (ii) request permission to carry it forward to a future holiday year. But the judge concluded that it was for the employee to raise this issue with her employer. Because Ms Fraser had not sought her employers’ agreement to carry holiday forward, she was not entitled to any further payment on the termination of her employment.

    KHS AG v Schulte

    The case of KHS AG v Schulte came before the ECJ. It concerned a locksmith who, following a heart attack, was unable to work. After a period of sickness absence extending over a number of years, his employment terminated. He then sought a payment in lieu of the holiday entitlement that he claimed to have accrued in the final three years of his employment. An issue arose as to whether a provision built into German law that limits the ability to carry unused holiday entitlement forward from one holiday year to the next breached European laws. The German laws limited the carry over period to 15 months. 

    The ECJ took account of the fact that the holiday entitlement enshrined in European law was intended to provide a rest from work, protecting the health and safety of workers. If employees were able to accrue holiday over the course of many years, then upon taking such leave, it would not be a way of taking appropriate rest; instead it would simply be a period of relaxation and leisure. For this reason, the ECJ found that the German rule that limited the accrual of holiday was reasonable and lawful.


    The cases in this area continue to stack up. But with each new decision, there are additional nuances and complications. There is the possibility that one or more of the domestic cases could be further appealed to a higher court. In the circumstances, this could be very helpful in providing further clarity on the situation in the United Kingdom.

    For now, if you are wrestling with your obligations in this area, it is essential that you take specific legal advice. We are on hand to help.

    For more information please contact Susanna Gilmartin on 01892 701322.

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