03/02/2009ECJ Ruling on Holiday Accrual During Long Term Absence

European Court of Justice (ECJ) Decides Annual leave does accrue during sick leave

Background:

In 2005 the Court of Appeal held that annual leave does NOT continue to accrue during long term absence. This seemed a very sensible decision and was based on the proposition that annul leave is about having a break from work – and if you have not been at work due to long term absence then you did not need break (sounds sensible to me).

This decision was appealed to the House of Lords who referred it to the European Courts (ECJ).

On 20th January 2009 the ECJ reached its long awaited decision (to read the case click on the case name: Gerhard Schultz-Hoff v Deutsche Rentenversicherung Bund and Stringer and ors v Her Majesty's Revenue and Customs.) 

The decision will not be popular with employers as the ECJ has decided that holiday DOES continue to accrue during sickness absence.

In summary the Court decided:
Annual leave does accrue during periods of sickness absence.
Member States are free to decide whether annual leave can or cannot be taken during a period of sickness absence.
Workers must either have the chance to take annual leave during the relevant annual leave year (even if they are absent for all or part of that year through sickness) or to carry it over to the next annual leave year. 
Workers have a right to payment in lieu of annual leave that they were not able to take due to sickness absence.   Such payment in lieu should be made at the worker's normal remuneration rate.

The case will now return to the House of Lords for a final judgement (this will happen later this year) and it is likely, that they will overturn Court of Appeal's (sensible) decision from April 2005.

The decision will have a number of implications:
Contracts and policies will need to be reviewed to allow for the changes (we will be providing further guidance to retained clients on this in due course)
Significantly the decision places an additional financial burden on employers
Employers do need to review all long term absence cases and take action promptly as failure to do so will mean that employees will accrue considerable amounts. So this is not good for employees either as tolerance of long term absence is likely on be reduced with organisations moving to dismiss those on long term sickness sooner than they may have previously done.

We will keep you posted…

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