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BRIEFING ON WORKING TIME REGULATIONS – HOLIDAY
PAY/LONG TERM SICK
STRINGER (formerly Ainsworth)
v HMRC – June 2009
The House of Lords decided on Wednesday 10th June 2009 in
favour of workers in the long-running litigation in
Stringer v HMRC
(sometimes referred to as
Ainsworth v HMRC), overturning the Court of Appeal.
The House of Lords unanimously held that a claim for unpaid holiday
under regulations 13 and 16 of the Working Time Regulations or a payment
on termination under regulation 14 can be pursued as unauthorised
deduction claims. This will mean
that a worker can take advantage of the more generous time limits which
apply to unlawful deduction claims, which can be brought within three
months of the last in a series of deductions, so allowing a claim to go
back more than three months if the underpayments form part of a series.
The House of Lords decision follows on from the European Court of
Justice decision (see below background) that a member state could allow
a worker off sick to take annual leave; or could prevent a worker taking
leave while off sick, if the worker has the right to carry over annual
leave to subsequent leave years if he or she was unable to take leave
due to illness. Furthermore, compensation payments on termination should
not be discounted on account of sickness.
Currently the UK
rules prevent carrying over statutory holiday entitlement into the
following leave year, and these are now likely to have to be revised in
light of this decision to accommodate situations where a worker has been
unable to take annual leave due to sick leave.
The Government will probably have to amend the Working Time Regulations
in the light of the decision. The BERR website states:
“BERR
is considering the implications of the judgment in relation to the
current Working Time Regulations. In the meantime employers should have
regard to the judgment.”
Background
On 20th January 2009, the European Court of Justice delivered
a positive judgment in the joined cases of Stringer & Others v Her
Majesty’s Revenue & Customs (UK Case) and Schultz-Hoff v Deutsche
Rentenversicherung Bund (German Case).
Both cases involve the interpretation of the Working Time
Directive (WTD) - implemented in the
UK
by the Working Time Regulations1998, as amended - in relation to the
effect of long term sick leave on a worker’s entitlement to paid annual
leave as provided for by the Directive.
In essence the ECJ has ruled that:
-
a worker on long term sick leave retains the right to paid annual leave;
-
the Directive does not prevent national legislation allowing a worker to
take annual leave while on sick leave;
-
nor does the Directive prevent national legislation which prohibits a
worker taking annual leave while on sick leave, provided that the worker
has an opportunity to exercise the right to paid annual leave during
another period;
-
there is no requirement for a worker on sick leave to have actually
worked during the course of the leave year in order to be entitled to
paid annual leave;
-
where a worker is unable to exercise the right to paid annual leave
during the relevant leave year/carry-over period due to sickness
absence, s/he is entitled to a payment in lieu if the employment
relationship is terminated;
-
where a payment in lieu is made in these circumstances, it must be
calculated on the basis of the worker’s normal entitlement.
Some of the reasoning behind the decision:
The ECJ pointed out that the purpose of the entitlement to paid annual
leave is to enable workers to rest and enjoy a period of relaxation and
leisure. The purpose of the entitlement to sick leave (the right to
which and its exercise is not governed by European legislation)
is so that workers can recover from illness. It said that the WTD gives
workers the right to a minimum of four weeks paid annual leave but it is
for the Member States to set out the circumstances in which workers can
exercise that right, without making the existence of the right subject
to any preconditions.
As a result, the Directive does not therefore prevent either the
authorisation or the prohibition of paid annual leave during a
period of sick leave. However, if the national rules do prohibit annual
leave being taken during sick leave, this must be subject to the
condition that the worker is able to exercise the right to annual leave
during another period.
On the issue of what happens to the entitlement, in situations where due
to sick leave, the worker is unable to exercise the right during the
relevant leave year or any carry-over period, the ECJ said the Directive
does not make any distinction between workers absent on sick leave
during the course of the leave year and those who have worked during the
leave year. Therefore, in relation to workers on sick leave which has
been duly granted, the right to annual leave cannot be made subject to a
requirement to have actually working during the relevant leave year. The
Directive does not prevent a Member State from stipulating that the
entitlement to paid annual leave is lost at the end of the leave
year/carry-over period, provided that the worker who has lost the right
to paid annual leave has actually had the opportunity to exercise that
right. Where this is not the case, then the Member State
can not stipulate that h/she would lose the entitlement.
In relation to what happens to a payment in lieu at the end of the
employment relations in these circumstances, the Court said that if the
employment relationship ends it is no longer possible for the worker to
take paid annual leave, the worker is therefore entitled to a payment in
lieu calculated on the basis of his/her normal remuneration.
The ECJ decision confirmed that annual leave continues to accrue during
long term sick leave, that a person must be given an opportunity to
exercise that right (this could be while on sick leave or at another
period for the Member State to decide) and, if the employment
relationship ends, the worker is entitled to a payment in lieu based on
the worker’s normal remuneration if s/he had been able to exercise the
right to take paid annual leave. The Stringer Case was then returned to
the House of Lords which gave judgment in light of the ECJ ruling on 10th
June 2009.
Although the decision was welcome, concern has been expressed in some
quarters that if workers are entitled to a payment in lieu in these
circumstances, this might encourage some employers to terminate
contracts of those on long term sickness absence earlier than they may
otherwise have done, to minimise the amount of any payment in lieu of
annual leave.
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