Most workers (and all employees) are entitled to four weeks' paid holiday under the Working Time Regulations (WTR) 1998. But what happens when someone has been off work on sick leave for any period of time - are they still entitled to holiday pay?

The Court of Appeal has decided in Commissioners of Inland Revenue v Ainsworth and ors that when the entitlement to sick pay has run out, workers cannot then claim holiday pay, whether or not they are still officially "on the books" of their employer. PCS instructed Thompsons on behalf of its members.

What did the court of appeal have to decide?

The Court of Appeal had to answer two questions:

  • Was the employment appeal tribunal (EAT) right to decide in Kigass Aero Components Limited v Brown (2002, ICR 697), that employees on long term sick leave who had exhausted their right to sick pay were still entitled to claim holiday pay, whether or not they were still in employment?
  • Do workers have to enforce entitlement to holiday pay under the Working Time Regulations or can they also make a claim for unauthorised deduction of wages under the Employment Rights Act 1996, as the EAT decided in List Design Group Limited v Douglas (2002, ICR 686)?

What did the Court of Appeal decide about Kigass?

The Court of Appeal agreed with the Inland Revenue that it did not make sense for a worker who had been off work for possibly a year or more as a result of some serious illness to then tell his or her employer that they were taking leave. Leave from what exactly, it asked?

It also agreed with the Revenue that, as the purpose of the regulations was to promote the health and safety of workers, it made no sense for someone who was not at work to claim that they needed to take a break from it. It would amount to nothing less than a windfall to pay them for it.

It decided, therefore, that workers on long-term sick leave who were still in employment could not claim holiday pay. It followed that it did not make sense to argue that employees who had been dismissed could be entitled to paid holiday, although it might produce some unfortunate anomalies (see comment).

What did the court decide about list design?

Regulation 30 of the WTR allows workers to bring a claim for non-payment of holiday pay within three months of when it should have been made. However, section 23 (1) of the Employment Rights Act (ERA) allows workers to bring claims against unauthorised deductions from wages, but only if there has been a series of them.

Mr Ainsworth had successfully relied on the ERA and the Inland Revenue challenged the decision in List Design that workers can bring a claim for non-payment of holiday pay under the ERA.

Again, the Court of Appeal agreed with the employers that Parliament cannot have intended to circumvent the WTR which were introduced to "provide a single and exclusive regime for the enforcement of the new statutory rights".

It concluded that if List Design were correct, it would not be possible to make a claim for statutory holiday pay under regulation 30. This also meant that the EAT decision in Canada Life Ltd v Gray and anor was also wrong.

Comment

As the court itself pointed out, this decision will lead to significant inequalities for workers. It will mean, for instance, that someone who is off sick for three months (say January to March) but who returns to work and is dismissed three months later can claim holiday pay for six months, but someone off sick for the whole six-month period cannot.

It accepted, however, that "to the extent that it may produce some unfortunate anomalies in sickness cases, it may merit consideration of legislative amendment at an early date."

The union will appeal the decision.