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

Unfortunately, the Court of Appeal in Commissioners of Inland Revenue v Ainsworth (2005, IRLR 465) (LELR 101) decided they were not. Although the case is being appealed, it is not likely to be heard until late next year.

In this article, a solicitor from Thompsons' Employment Rights Unit in Sheffield and Leeds looks at the implications of that decision, and advises trade unionists what to do to protect their members' interests until the case has been heard by the House of Lords.

 

What were the main effects of the decision?

There were two main effects of this decision. First of all, workers cannot claim holiday pay under the WTR for periods during which they are on sick leave. This overturns the decision of the employment appeal tribunal (EAT) in Kigass Aero Components Ltd v Brown (2002, IRLR 312).

Secondly, workers who want to claim that their holiday pay rights under the WTR have been breached cannot take claims such as unauthorised deduction of wages claims. This over-turns the decision of the Scottish EAT in List Design Group Limited v Douglas (2003, IRLR 14). Instead, they can probably only claim for breaches of their WTR rights that have occurred during the current holiday year.

Having said that, it may be possible to argue that claims can also be taken in respect of breaches of entitlement to holiday for the previous holiday year, as long as the claim is submitted within three months of the end of that holiday year.

This is because the three month time limit for claims for breaches of regulation 13 (the right to take holiday) run from the end of each holiday year.

Our advice is always to err on the side of caution, however, and submit a claim within three months of a refusal of holiday. If, for some reason, the worker was not able to submit the claim in time, it might be worth running the other argument as a possible "get-out" clause.

 

Does this decision affect contractual rights?

The simple answer is no - the decision in Ainsworth only affects workers' rights under the WTR. Contractual rights are unaffected. So, for example, employees remain entitled to any contractual right to accrued holiday pay on termination.

Usually, that will be expressly dealt with in a contract of employment. But remember that it may also be implied by custom and practice, so if that's what has always happened in the past, then employees remain entitled to it in the future. Even if the right is not written down anywhere.

On top of that, employers have to provide employees with a statement of particulars under section one of the Employment Rights Act 1996. This must contain particulars of, amongst other things, any terms and conditions relating to "entitlement to holidays (including public holidays) and holiday pay (the particulars being sufficient to enable the employee to precisely calculate his entitlement, including to accrued holiday pay on the termination of employment)" (section 1(4)(d)(i)).

If this is not included in the statement of particulars, ask the employer to explain what the position is. Unfortunately, the employer may still be entitled to refuse to pay accrued holiday pay on termination even if there is no section 1(4) statement.

That is because, generally speaking, there is no implied right to be paid for accrued but untaken holiday when the employment terminates, in the absence of a specific provision to that effect - Morley v Heritage plc (1993, IRLR 400 CA).

 

What about deduction of wages claims?

Our advice is that if members have potential claims for holiday pay going back more than one holiday year, trade union officials should continue to submit ET1 claim forms on both counts.

In other words, submit claims under the WTR and as unauthorised deduction of wages claims. The tribunal should be asked to hear the WTR claim in relation to the most recent breaches; but stay the rest of the case pending the decision of the House of Lords on the Ainsworth appeal.

The other alternative is to ask the tribunal to stay the claim in relation to the previous year's holiday pay, but get a ruling on the current year's holiday pay due under the WTR.

 

Can paid leave be reduced?

Some employers may try to argue that workers' rights to paid leave should be proportionately reduced by the amount of sick leave taken during any leave year. This is one of the potential (and arguably illogical) consequences of Ainsworth.

Union officials should tell employers that they will challenge any such interpretation, not least because the comments from the Court of Appeal on that issue were "obiter" (and therefore do not need to be followed).

In any event, as stated above, Ainsworth does not affect workers' contractual rights, only rights under the WTR. Arguably therefore, unless the contract specifically allows for it, an employer must allow an employee returning from a period of sick leave their full contractual right to leave for that holiday year.

If a period of sick leave straddles two holiday years, however, and the contract does not allow an employee to carry over leave into the next leave year, there is no right to do so. But there is nothing to stop members (with support from their trade union rep) from trying to persuade the employer to allow some of the sick leave to be classed retrospectively as holiday leave.

 

Do Holidays Still Have to be Notified?

The requirement set out in the Kigass decision to notify the employer of a period of leave in order to qualify for it still remains. So continue to advise members to apply for their holidays, twice as many days in advance of the holiday as the number of days leave they want to take (regulation 15).

 

What Else Should Trade Unions Do?

We suggest that officials tell employers that Ainsworth is being appealed and that pending the decision of the House of Lords, the status quo should apply. In other words, workers should continue to be entitled to take a period of paid holiday leave, during sick leave.

Don't forget that the statutory grievance procedure applies to both working time and unauthorised deduction cases. Workers therefore need to lodge a grievance with their employer within three months of the breach, and then wait at least 28 days before submitting a tribunal application.

If in any doubt about what to do, seek legal advice from the union's legal department.

 

Comment

Whatever way you look at it, the decision in Ainsworth is not good for workers. It will, in effect, allow unscrupulous employers, who have not paid holiday pay due to its workers for years, to evade their workers' rights for all but the most recent breaches.