Employment e-Brief: At last! Some proper guidance on carried over unused annual leave

Wednesday 8th July 2015

For too long now there has been uncertainty about the length of time annual leave which is unused because of sickness absence needs to be carried forward by employers. This uncertainty has resulted in some considerable payments being made to employees dismissed for long term illness but in other cases, it has resulted in employers deciding not to dismiss at all, rather than risk crystallising a large latent liability.

The EAT has now ruled that annual leave unused because of sickness can be carried over for 18 months as a maximum where they have been unable or unwilling to take it because of sickness in the case of Plumb v Duncan Print Group Ltd.  The employee in this case, Mr Plumb, was dismissed after nearly 4 years’ absence following an accident.

Another cause of confusion arose from whether workers needed to actually show that they were physically unable to take the annual leave by reason of their condition for this carry over provision to apply.

Following a review of the relevant EU and UK case law the EAT said there appeared to be 2 basic scenarios. First, is the situation where an employee cannot take annual leave during a period of sick leave which coincides with a leave year, they are then entitled to take annual leave in a subsequent leave year. Second, they are permitted to take annual leave while on sick leave, in which case they have the choice to either take annual leave during the sick leave or to take it later.

The EAT decided that an employee who is absent from work on sick leave does not need to show that they are physically unable to take annual leave by reason of their medical condition. The EAT said that prior case law did not say this.  If they were unable or just unwilling to do so, then they can carry it over. All that appears to be needed is for the employee to be able to show that they were absent on sick leave and did not choose to take annual leave during the relevant periods.

As to how long it can be carried forward the EAT noted that in this case there was no contractual limit in Plumb’s contract. Additionally of course, no such limits appear in the legislation. However the EAT rejected the argument that carry-over should be unlimited. Reg 13(9) of the Working Time Regulations 1998 SI 1998/1833 provides that annual leave must be taken in the year in which it is due and case law has interpreted this to include an exception for persons on sick leave who are unable or unwilling to take annual leave during the leave year. The EAT said that exception need go only so far as required under the Working Time Directive (No.2003/88) and European case law has indicated that the Directive requires at most 18 months of carry-over in such circumstances. Therefore this should be taken as applying to the Working Time Regulations as well.

Good for employers looking to tidy up some long running sickness cases. Not so good for employees who are unable physically to return to work but who have been just waiting for the axe to fall expecting that when it did there would be something of an accrued nest-egg waiting for them.

To discuss this e-Brief in more detail, please contact a member of the Employment team.