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With Summer upon
us, The House of Lords has finally delivered
its decision in Stringer and Others v HMRC
on the long running and hotly debated topic
of a workers entitlement to holiday pay
during sick leave.
The ECJ decided in January this year that:
- a worker who is on indefinite sick
leave for the whole of an annual leave
year is entitled to a period of four
weeks’ paid annual leave, despite the
fact they are not actually at work; and
- the right to paid annual leave is
carried over at the end of a leave year
if the worker was on sick leave for the
whole of that year; further he does not
lose this entitlement if he was absent
on sick leave for part of the year and
was still on sick leave when his
employment terminates
The parties accepted the ECJ judgement in
this regard and so the House of Lords only
had to decide whether a claim based on an
alleged failure to make payments due under
Regulations 13, 14 and 16 of the Working
Time Regulations 1998 (“WTR”) be brought by
way of a claim for unauthorised deduction
from wages under Part II of the Employment
Rights Act 1996?
The House of Lords decided they can. This
means that a claim can brought for a failure
to pay holiday pay can extend to successive
holiday years where the claim relates to a
series of failures to pay. The only
limitation is to lodge a claim within 3
months of the last deduction. Before, a
claim under the WTR had to be brought within
three months beginning with the date on
which it is alleged that the exercise of the
right under the WTR should have been
permitted, preventing workers from pursuing
holiday pay spanning back years!
In a nut shell the decision means that a
worker can accrue and take statutory holiday
during sick leave, which will not be welcome
news for employers. Where there is a failure
to pay holiday pay over a number of years
then the worker can claim back all lost
holiday pay where it forms a series of
deductions.
For those with employees’ on long term sick
extending beyond 1 year then there is a
potential exposure up to 6 years worth of
holiday pay (being the limitation as to how
far back a claim can be pursued for unlawful
deductions). One method to limit your
exposure with these employees’ is to now
make payment for last years holiday
entitlement only explaining that you have
done so in light of a change in the law. By
doing so you break the series of deductions
meaning the 3 month limitation period starts
running against the employee as soon as you
make payment. Most employees’ will be
unaware of their specific entitlements and
by the time they do it will be too late to
claim!
Employers who operate PHI schemes may wish
to address how they approach PHI payments in
conjunction with holiday pay. It may be
necessary to liaise with the provider and
agree that any PHI payments payable during a
period of holiday pay can be retained by the
business as part recoupment of its holiday
pay costs. The alternative is to renegotiate
the PHI premiums down to cover a maximum of
46.4 weeks pay per annum per employee which
takes into account your liability to pay 5.6
weeks holiday pay per year regardless of the
fact that an employee is off on long term
sick. At least you recover some of the extra
cost arising from this decision.
For further information on holiday issues or
any other employment issue contact
Oliver McCann
on 01254 297930.
Copyright 2006 - 2010
Taylors Solicitors
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