A European Court of Justice ruling, released on January 20th, states that employees should still accrue paid holiday, on the basis that they could not take those days off due to sickness.

The ruling came after the House of Lords requested  clarification over the case of five Her Majesty Revenue and Customs workers’ rights to long-term sick leave. This reverses the Court of Appeal’s ruling four years ago that found workers ineligible to claim holiday pay.

The CBI responded describing the ruling “a real blow to firms trying to keep jobs alive during the recession”.

Katja Hall, CBI’s director of HR policy went on to say: “Businesses also suffer when staff take sick leave, and we had hoped that a compromise could have been achieved over unused holiday time”

“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.”

Mark Mansell, head of employment at City law firm, Allen & Overy, advised companies that the ruling could prove costly for employers who have a “backlog of accrued holiday entitlement” from employees returning to work.

Some 2.6million people in the UK are claiming incapacity benefits. Sick leave is estimated to cost the economy £100billion a year.