Where does long-term sick leave end and annual leave begin?

The boundaries between annual leave and sick leave and where they lie has been a growing issue in both the courts and employment tribunals over the last couple of years, points out Harriet Broughton, a solicitor at Bevans.

The problem arises because the Working Time Regulations 1998 state that annual leave “may only be taken in the leave year in respect of which it is due”. In effect, this means that annual leave entitlement cannot be carried forward into the next holiday year as the Regulations take a ‘use it or lose it’ approach.
 
The situation does not normally present a problem. But what happens if an employee goes on long term sick leave that lasts for the entire holiday year?
 
This problem was dealt with in the case of Stringer and ors vs Revenue and Customs Commissioners, which went all the way to the European Court of Justice. The ECJ concluded that a worker who is suffering from long-term illness is entitled to paid annual leave and so will accrue that annual leave during their sickness absence.
 
After the decision in the Stringer case, the general consensus was that personnel could convert a chunk of their sick leave into annual leave. For example, if an employee was signed off for 12 months, they would receive 11 months sick pay and one month’s annual leave pay.
 
That being said, a much earlier decision by an Employment Appeal Tribunal meant that workers used to have to make a request for annual leave. Failure to do so resulted in the right to that annual leave being lost.
 
Conflict in UK law
 
But this position was changed following the Spanish case of Pereda vs Madrid Movilidad SA. In this instance, Mr Perada had taken annual leave but became ill during his holiday. The ECJ looked at the situation again. It decided that, if a worker was unwell, they could elect to take their annual leave at a later date, that is, at a point in time when they weren’t ill.
 
The problem with this decision, however, was that it created a conflict in UK law – a worker who was off work due to long-term illness did not have to take annual leave during their sickness absence, but were not allowed to carry annual leave over into the next holiday year.
 
But this conundrum was solved in the case of NHS Leeds vs Larner, which was heard by an Employment Appeal Tribunal. In this case, the worker had been off sick for the entire leave year. Her employment was terminated and the NHS failed to pay her the accrued annual leave from the previous holiday year.
 
The worker argued that she had accrued a years’ worth of annual leave during her sickness absence and that it had to be carried over into the next leave year. The NHS countered that she had failed to make a request for annual leave and, therefore, had forfeited her entitlement to it.
 
The Employment Appeal Tribunal, meanwhile, found that, because the worker was off work due to long-term illness, she hadn’t had the opportunity to take annual leave and had a right to take it when she was not unwell. Her failure to put in a request did not prevent the annual leave from accruing and, as she had not been well enough to take the annual leave previously, it automatically carried over into the next holiday year.
 
This final case is a useful reminder that a worker who is off work due to long-term sickness accrues annual leave entitlement throughout their period of illness. If their health improves and they return to work, then they are entitled to take any accrued annual leave in the current leave year. If their employment ends, they are entitled to be paid for all accrued annual leave.