An employment appeal tribunal (EAT) has capped the amount of holiday allowance that employees are able to automatically carry over while off on long term sick leave at four weeks.
Judge Lady Stacey ruled that employers were not compelled to carry over additional leave beyond the statutory four week minimum when employees are off sick, unless there had been a prior agreement.
The ruling in Sood Enterprises v Healy further developed what Lady Stacey called "a complicated and evolving area of the law".
This followed the Court of Appeal judgement last year in the NHS Leeds v Larner case which confirmed that employees were entitled to automatically carry over holiday pay while off on long-term sick leave without needing to request it.
Serjeants' Inn barrister Rad Kohanzad explained: "Mr Healy was off work sick for a year and a half when he resigned. The EAT held that unlike 'ordinary' annual leave, provided for by Regulation 13 Working Time Regulations 1998, additional annual leave, provided for by Regulations 13A Working Time Regulations, cannot be carried over unless there is an agreement in place between the parties, which there was not.
"In other words, when an individual is on long-term sick leave, only four weeks' annual leave carries over automatically - and not the additional 1.6 weeks granted by UK law which exceeds the European minimum of four weeks' annual leave."
Mr Healy had been working for Sood Enterprises for several years before suffering a stroke in July 2010.
He submitted sickness certificates and received sick pay for a period of time but did not recover his health sufficiently to resume work and resigned from his employment in June 2011.
The employment tribunal found Healy was entitled to holiday pay during two leave years, (calendar years 2010 and 2011) accruing while he was off sick and for which he had made no request during the first leave year, which Sood Enterprises appealed.
However, Lady Stacey rejected this approach, finding that Working Time regulation 13A, which governs additional holiday pay, did not allow for the carrying over of payment in lieu of additional leave without an agreement.
"I agree that holiday pay due under regulation 13 A, that is additional holiday pay, is correctly categorised as ‘wages'; I do not agree that such categorisation settles the question of whether it can be carried over," she said.
"The regulations provide that it cannot, absent agreement. The case of Neidel v Stadt Frankfurt am Main is to the effect that national law may make conditions about the payment of wages in lieu of additional leave. Regulation 13A does so. It must be given effect."
She also noted that if the original tribunal's finding had been correct it would have been incompatible with the European working time directive.
