Sick staff build up holiday rights, says Advocate General

The Advocate General's opinion is not binding, but is mostly followed by the European Court of Justice (ECJ), which will later rule on the case involving employees and the UK HM Revenue & Customs (HMRC).

Employees who were on sick leave took employment tribunal claims against HMRC to assert their rights to take leave or, in the case of those who had since been dismissed, be paid in lieu of leave. Their claims were made under the Working Time Regulations.

Though the claims were upheld by the original tribunal, the Court of Appeal rejected them. When the case reached the House of Lords, they asked the ECJ to interpret the Working Time Directive, from which the Regulations came.

Advocate General Verica Trstenjak has said that workers should be allowed both the holiday entitlement for the period during which they were sick and payment in lieu of it if they had been fired.

Trstenjak said that there must be no confusion between sick leave and holiday, and that the two must never run concurrently. "Sick leave and annual leave serve different purposes and therefore must not, for legal purposes, be regarded as interchangeable," she wrote.

The ruling will not be welcomed by employers, said Catherine Barker, an employment law specialist at Pinsent Masons, the law firm behind OUT-LAW.COM.

"This is disappointing for employers because it will potentially increase the cost to employers of keeping the long-term sick on their books," she said. "But it could also be bad news for employees because it could lead to employers looking to limit their liability in sickness cases by terminating employment more quickly than they otherwise would, even if absent for genuine incapacity reasons."

The opinion says that there is a basic right to paid leave, and that it cannot be taken away by illness. "The existence of the right to paid annual leave cannot be made subject to a worker’s capacity for work and therefore in principle a worker rendered incapable of work through illness has a corresponding right to annual leave," wrote Trstenjak. "However, he may not take this leave during a period in which he is otherwise on sick leave."

In a second case ruled on by the Advocate General from the German courts, Trstenjak said that any leave built up cannot be cancelled just because the end of an administrative year passes.

"Employees will be able to take holiday leave even if it means taking it in a subsequent leave year," said Barker, explaining the opinion. "In addition, if an employee's contract is subsequently terminated he will be entitled to be paid in lieu of leave which has accrued but not been taken during sick leave. It is not entirely clear whether that extends to any untaken holiday carried over from a previous leave year – although this would seem to be the suggestion from the opinion."

"The Advocate General's view is that it will be equally important for an employee to have a paid period of rest period between jobs if he or she has been unable to take advantage of this whilst still employed, due to illness or injury," said Barker.

Another unclear point is how far the opinion can go, said Barker. "It is not clear from the Advocate General's opinion whether there is any limit on the right to take holiday once the worker is fit to return to work or to be paid in lieu if the employment has terminated," she said. "For example, can a worker who has been on long term sick leave for two years take two years' worth of statutory annual leave when they return to work from sick leave? Are they entitled to pay in lieu of that holiday if the employment is terminated?"

"If the full European Court does follow this opinion I think that employers will need to become more proactive in managing long-term sickness absence rather than letting employees, who may never even return, fester on the payroll indefinitely," said Barker. "If there is no limit on the number of years' annual leave entitlement that can be carried over or be paid in lieu of, employers may have to consider whether they can limit their liability by terminating employment sooner rather than later – although in doing so they will need to take care not to fall foul of disability discrimination and unfair dismissal laws."