Bad News for Employers – Employers Must Pay Holidays and Sick Leave

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There’s been some confusion regarding the law around holidays and sick leave for some time but a recent Employment Appeal Tribunal (EAT) has provided some clarity which may not be what most employers would be hoping for. The EAT has held that in NHS Leeds v Larner, a worker who was absent for over a year and failed to submit a request for annual leave before the end of the holiday year is still entitled to be paid for the accrued leave on termination of their employment. Mrs Larner had been employed by Leeds NHS as an administrator. Their holiday year ran from April to March and she was only allowed to carry over holiday entitlement to a subsequent leave year in special circumstances following a written request by the employee and approval from her employer. Mrs Larner went on sick leave on 9th January 2009 and her employment was terminated on incapacity grounds on 6th April, 2010 having received full pay for six months and half pay for six months under the NHS sick pay scheme. She had no pre-agreed holiday booked when she was signed off sick and whilst off did not make any request for holiday. When terminating her employment, Leeds NHS considered she was not entitled to be paid in respect of accrued but untaken holiday entitlement for the leave year ending 31st March, 2010 as she had made no request to take the leave or to carry it forward. The EAT upheld the tribunal’s decision that Mrs Larner was entitled to be paid in lieu of her holiday entitlement for the 2009/2010 year as she had not had the opportunity to take the leave due to her sickness absence. The EAT considered that as she was signed off sick she was therefore "presumed not to have been well enough to exercise her right to enjoy a period of relaxation and leisure." It was stated that she therefore had the right to carry over her holiday entitlement to the following year and that in the circumstances, this did not depend upon her making a formal request to carry her leave forward and the right to be paid in lieu crystallised when she was dismissed. Although in this case, Mrs Larmer’s claim only went back one year, the principles set out in this decision may allow an employee to be paid in lieu for more than one year of holiday that has been accrued and not taken upon termination of their employment. The EAT did however provide a little hope for employers stating that the position might be different where a fit employee failed to make a request for leave during the relevant year because they would have had the opportunity to take their leave.

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