Holiday rights for workers on sick leave – House of Lords decision

The House of Lords has handed down its long-awaited judgment in HM Revenue and Customs v Stringer and others, confirming that workers on sick leave who are deprived of their rights to holiday pay under the Working Time Regulations 1998 (WTR) can pursue a claim for unlawful deductions from wages under the Employment Rights Act 1996 (ERA). 

Background

In brief, the case concerned five employees who brought claims under the WTR, arguing that they should be entitled to, in one case, take paid annual leave during sick leave, and in the other cases, receive payment in lieu of untaken annual leave on termination. The employees were successful in the Employment Tribunal and the Employment Appeal Tribunal (EAT). The Court of Appeal, however, overturned the EAT decision, stating that a worker on sick leave cannot take paid annual leave under the WTR and is not entitled to a payment in lieu of untaken leave on termination of employment. The workers appealed to the House of Lords which referred the matter to the ECJ. The ECJ ruling confirmed a number of key points:

• Workers on sick leave accrue statutory annual leave during their absence. 
  
  
• Whether annual leave can be taken during a period of sick leave is a matter for national courts to determine.
  
  
• Where workers have been on sick leave for the whole or part of the leave year, the right to paid annual leave is not extinguished at the end of the leave year. Workers must have the opportunity to carry over the leave and take it at a later date.
  
  
• Workers who have been on sick leave for the whole or part of the leave year and have not been able to take annual leave before termination of employment are entitled to a payment in lieu of any outstanding statutory holiday entitlement.

House of Lords' decision

When the case recently returned to the House of Lords, it restored the EAT's decision. Significantly, and to the surprise of many, the House of Lords did not consider the key question of how the annual leave provisions under the WTR apply to workers on sick leave, as the parties agreed that the EAT's decision on this issue should be reinstated in light of the ECJ's ruling. 

Instead, the House of Lords considered the remaining issue of whether a claim for non-payment of annual leave could be brought under the ERA, as well as the WTR, on the basis it amounts to an unlawful deduction from wages. It confirmed that this was possible, as a payment for statutory annual leave fell within the definition of "wages" under section 27 of the ERA, which could be given a wide interpretation. Importantly, under the ERA, where there is a series of deductions, a claim for unlawful deductions can be brought with three months of the last deduction, potentially enabling workers to recover unpaid holiday pay from previous years. Under the WTR, such a claim must generally be brought within a shorter period, i.e. three months of the initial breach of the WTR. The ERA therefore provides a much more generous time limit for workers.

Key issues

As the House of Lords did not consider the extent to which workers on sick leave are entitled to annual leave, as had been expected following the ECJ ruling, this has left a number of complex issues unresolved (for example, the House of Lords did not specifically address the difference between the ECJ ruling (which states that sick workers who cannot take their annual leave in a leave year can carry it over) and the WTR (which do not, as currently drafted, permit annual leave to be carried over)).

In the meantime, workers on long-term sick leave should accrue statutory annual leave and should be entitled to a payment in lieu of untaken statutory annual leave on termination. Workers can also bring claims for non-payment under the ERA, on the grounds of unlawful deductions from wages, and potentially benefit from the more generous time limit for bringing claims.

If you would like to discuss the impact of the case further and the specific implications for your workforce, contracts and policies, please let us know.

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Single Equality Duty – consultation

The Government Equalities Office (GEO) has published its proposals for the new Single Equality Duty, which will require public bodies to tackle discrimination and advance equality of opportunity.

The Equality Duty is central to the Equality Bill, which was published in April 2009. It is intended to build on the existing gender, race, and disability duties, and will be extended to cover age, sexual orientation, gender reassignment, and religion or belief. The GEO consultation paper outlines proposals for the specific requirements, to be set out in secondary legislation, which will help public bodies meet the new Equality Duty in an effective and proportionate way.

The consultation, which closes on 30 September 2009, proposes that public authorities:

• should develop and publish equality objectives and set out the steps they intend to take to achieve them.
  
  
• should report annually on progress against their objectives, and review their objectives at least every three years. 
  
  
• (with 150 or more employees) should publish their gender pay gap figures, their black and minority ethnic employment rates and their disabled people employment rates.

The GEO also proposes a set of specific duties which are aimed at helping public bodies to use public procurement to contribute to the delivery of their equality objectives. The proposals require contracting authorities to:

• include in their equality objectives how they will ensure that equality factors are considered as part of their public procurement activities to help contribute to the delivery of those objectives 
  
  
• consider the use of equality-related award criteria, and incorporating equality-related contract conditions, where they relate to the subject matter of the contract and are proportionate
  

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New national minimum wage rate for apprentices