Untaken Annual Leave

The Employment Appeal Tribunal (EAT) has held that where an employee chooses not to take statutory annual leave during sick leave, he or she can carry forward the untaken annual leave for up to 18 months from the end of the leave year in which the leave arises.

The Employment Tribunal Case

Mr Plumb was employed by Duncan Print Group Limited as a printer. He sustained an accident at work on 26 April 2010 and was on sick leave until his employment terminated on 10 February 2014. The company’s employee handbook provided that employees were not permitted to carry forward unused annual leave into the next leave year, unless agreed in writing. Mr Plumb did not take and did not express any wish to take annual leave until 2013. Duncan Print Group Limited agreed to pay Mr Plumb’s salary for annual leave during 2013 only. Following termination of his employment, Mr Plumb claimed for payment in lieu of untaken holiday leave for the 2010 to 2012 leave years (a total of 60 days) under the provisions of the Working Time Regulations 1998.

The ET dismissed Mr Plumb’s claim on the basis that he could not demonstrate that he was unable by reason of his medical condition, to take annual leave during the period whilst he was on sick leave. In reaching its decision, the ET took into consideration the Court of Appeal decision in NHS Leeds v Larner which held that a person who is on sick leave will be entitled to carry over their leave if they were either unable or unwilling to take annual leave because they were on sick leave and as a consequence did not exercise their right to annual leave. The ET determined that the relevant issue, in this case, was whether Mr Plumb was ‘unable’ to take leave not whether he was ‘unwilling’ to do so. It decided, on the evidence, that Mr Plumb had been able to take annual leave. Mr Plumb appealed.

The Employment Appeal Tribunal (EAT)

The EAT summarised the principles for entitlement of an employee to annual leave while on sick leave as follows:

  • If the employee is not permitted under his or her contract of employment to take annual leave during a period of sick leave, the employee is entitled to take annual leave in a subsequent leave year.
  • If the employee is permitted to take annual leave while on sick leave, he or she can choose to take annual leave during the period of sick leave, but is not required to do so, and may take the annual leave at a later date.

The EAT stated that it would not be consistent with the underlying purpose of sick leave (to enable recovery from illness) and annual leave (to enable a worker to enjoy rest and relaxation) to compel a worker on sick leave to take annual leave at the same time.

The EAT Outcome

The EAT determined that:

  1. Mr Plumb was not required to demonstrate that he was unable to take annual leave by reason of his medical condition and that ‘unwillingness’ was not an issue in the case. Since Mr Plumb didn’t request any annual leave during his sick leave prior to 2013, the only inference that could be drawn was that he did not wish – or was unwilling – to take annual leave during those years.
  2. The Working Time Regulations should be interpreted to permit a worker to take annual leave within 18 months of the end of the leave year in which it was accrued where the worker was unable or unwilling to take annual leave because they were on sick leave and, as a consequence, did not exercise their right to annual leave.

In view of the above, Mr Plumb’s appeal was allowed to the extent that he was entitled to payment in lieu of annual leave in respect of the 2012 to 2013 leave year only. His claims in respect of 2010 and 2011 failed as he had not taken that holiday within 18 months of the end of each leave year.

The EAT gave both Mr Plumb and his employer permission to appeal to the Court of Appeal because the legal issues that arose in the case involve arguable and complex questions of EU law.

Implications for Employers

Employers must allow employees to carry forward their basic statutory entitlement to four weeks’ annual leave in each year if the employee does not take this leave while on sick leave, whether through choice or inability to take leave because of ill-health. The employer should also pay the employee for accrued annual leave entitlement on termination of employment.

Although this decision provides assistance to employers in calculating and limiting payments in lieu of accrued untaken leave on the termination of employment, both parties have been granted the right to appeal, so this may not yet be the end of the story.

Untaken Annual leave – Due to COVID-19, the Government announced on Friday 27th March 2020, that workers who have not taken statutory annual leave entitlement will now be able to carry it over into the next 2 leave years.

Currently, almost all workers are entitled to 28 days of holiday including bank holidays each year. The regulations will allow up to 4 weeks of unused leave to be carried into the next 2 leave years, easing the requirements on business to ensure that workers take the statutory amount of annual leave in any one year.

This will mean staff can continue working in the national effort against the coronavirus without losing out on annual leave entitlement.  In addition, all employers affected by COVID-19 will have the flexibility to allow workers to carry over leave at a time when granting annual leave could leave them short-staffed in some of Britain’s key industries, such as food and healthcare.

If any of the issues raised about untaken annual leave in this article affect your business, please give us a call to discuss your options. We’re a friendly bunch and really keen to make a difference to your business by finding a solution that works for you and your business so please contact us.