Workers earn holiday entitlement when off sick, says ECJ

The ECJ was asked by the House of Lords to rule on whether holiday entitlement could be built up during sick leave. It also ruled on whether any built-up holidays could be held over beyond the end of a calendar year, when the right to holidays normally expires.

The ruling also says that workers who leave an employer or who are sacked must be compensated for any leave they did not have a chance to take.

"A worker does not lose his right to paid annual leave which he has been unable to exercise because of sickness. He must be compensated for his annual leave not taken," the ruling said.

Employers' representatives have said that the ruling is a blow to business at a difficult time.

"Businesses themselves also suffer when staff take sick leave, and we had hoped that a compromise could have been achieved over unused holiday time," said the CBI's director of HR policy, Katja Hall, according to the BBC.

"Instead, at a time when the economy is struggling, this judgment will ensure that staff are away from the workplace for longer, and it will create a headache for HR departments, who will have to review their policies and contracts," she said.

Employment law expert Philip Titchmarsh said that the ruling would increase the cost to businesses of employees being off sick.

"The real impact of today's decision is on the cost to employers of managing long term sickness cases," he said. "What is clear from the ECJ decision is that holiday, under the Working Time Regulations, continues to accrue while an employee is off sick and employees will have to be allowed to carry this forward from one holiday year to the next, if their sick leave has meant that they have not had the opportunity to take their paid holiday. This is despite what an employee's contract of employment might say."

The Court of Appeal has previously said that workers could not actually take holiday time when they are off work sick. The House of Lords will have to reconsider this, said Titchmarsh.

"Very often employees who are absent on long-term sick leave who have exhausted their entitlement to sick pay ask to take paid holiday. The Court of Appeal in England has previously said that this is not allowed - you are either off sick or on holiday; an employee can't take holiday while off sick," he said. "The ECJ has decided that whether this is allowed or not is a matter for our national courts to decide. So we will have to wait and see if the House of Lords agrees with the Court of Appeal on this issue."

The House of Lords case involved workers at HM Revenue and Customs, who argued that they were entitled to holidays while on sick leave.

Titchmarsh said that when that case returns to the House of Lords it will have to make a decision on what kind of case it is. If it allows it to be run as an unlawful deduction from wages case then the implications for employers could be significant.

"The practical consequence of being able to run it as a claim for unlawful deduction from wages is that your claim can go back to when the [Working Time] Regulations came in in 1998. So from an employer's point of view that's potentially a very expensive claim," he said.

Titchmarsh said that there are possibly thousands of cases in the Employment Tribunal system which are on hold waiting for this ruling.