Workers on Long-term Sick Leave and Statutory Holiday Entitlements

In February 2004, the case of Ainsworth & Others v Commissioners of the Inland Revenue came before the Employment Appeal Tribunal.

The cases concerned Inland Revenue employees who had been off work for substantial periods without pay but who remained employees, for example on account of long-term sickness.

The Employment Appeal Tribunal had recently dealt with similar claims on the issue as to whether a worker who is off work for a long period without pay is entitled to claim statutory paid holiday under the Working Time Regulations 1998 even if he or she has not attended work during the relevant period and also whether the rules on unlawful deduction from wages are relevant in that situation. Under the Working Time Regulations, there is a three month time limit for such claims. If, however, claims can be brought under the Employment Rights Act 1996 and it can be shown that the claim is part of a series of unlawful deductions then, provided a claim is brought within three months of the last deduction, there is no time limit on how far back the claim can go.

The Employment Appeal Tribunal had previously held that the Working Time Regulations give someone who is still an employee the right to holiday pay, even if he or she has been absent from the workplace for a substantial period.

On this occasion, the Employment Appeal Tribunal did not decide the cases but rather suggested that the Court of Appeal should rule on the matter. The Inland Revenue duly went to the Court of Appeal.

In a unanimous decision, the Court of Appeal has held that the right to four weeks' statutory paid holiday under the Employment Rights Act does not continue to accrue whilst an employee is absent on long-term sick leave. This decision only refers to employees who are absent for an entire holiday year. The decision was based on the argument that leave cannot be taken by someone who is not at work. In addition, the holiday entitlement under the Regulations is designed to ensure minimum health and safety standards apply to working time. If an employee is not at work, he or she cannot derive any health benefit from taking leave.

The Court of Appeal also decided that claims to enforce entitlement to holiday pay under the Working Time Regulations cannot be made as applications in respect of unauthorised deductions from wages under Employment Rights Act. Claims can therefore only be made in respect of the one, relevant holiday year.

Whilst this judgment has clarified the position regarding employees who are absent for a complete holiday year, it is as yet unclear whether in the case of an employee who is away from work for most of the year, but who is then able to return to work, the entitlement to holiday will have accrued during the period of absence. Employers are therefore advised to seek advice when dealing with this issue.