EAT rules sick employees must give notice of intention to take holiday in order to be paid for it

Fraser v Southwest London St George’s Mental Health Trust EAT/0456/11

long-term sick leave | annual leave | holiday pay

The Employment Appeal Tribunal (EAT) has held that employees on sick leave must, to be paid for holiday under the Working Time Regulations 1998 (SI 1998/1833), give the required statutory notice during the relevant leave year of their intention to take that holiday. 

Mrs Fraser was employed by the trust. She injured her knee in an accident at work in November 2005, and did not return to work before her dismissal in October 2008. On her dismissal, she was paid for her accrued but untaken holiday entitlement for the 2008/09 leave year, but brought a tribunal claim for her statutory four weeks’ holiday pay for the 2006 and 2007 leave years. She had not taken holiday accrued during these leave years, nor had she requested to take it. 

At the tribunal hearing, the parties accepted that Mrs Fraser had accrued statutory holiday in each of the two leave years in question. The trust argued that, if Mrs Fraser wanted to be paid for that holiday, she was obliged to give notice of her intention to take it under reg.15 of the Working Time Regulations 1998. It argued that she had not done so and, therefore, was in the same position as any other employee who had not exercised the right to paid annual leave. The Regulations provide that the “basic” four weeks’ statutory entitlement cannot be carried over, and so it was lost. The tribunal agreed with the trust, noting that the relevant authorities do not indicate that reg.15 should not apply to workers who are off sick. Mrs Fraser took her case to the EAT. 

The main question before the EAT was whether or not it was a condition of Mrs Fraser’s entitlement to statutory holiday pay that she should have formally “taken” her annual leave by giving notice in accordance with reg.15. 

The EAT considered that the purpose of statutory holiday pay is as an incentive for employees to take their statutory holiday: if it is not paid, there would be a reason for them to forgo it. However, this purpose has no application where statutory holiday has not been taken, which is why, under the both the Working Time Directive (03/88/EC) and the Regulations, the commutation of holiday into holiday pay is expressly proscribed. 

Given this logic, the EAT held that the earlier case of Kigass Aero Components Ltd v Brown [2002] IRLR 312 EAT was correct in treating the Regulations as entitling employees to payment only for statutory holiday that they have actually taken. If the Regulations entitled payment for statutory holiday regardless of whether or not it has been taken, that would be inconsistent with the purpose of the Directive and Regulations. The EAT said that it “cannot be right for employees to receive holiday pay for leave which they have never taken”. It held that the cases of List Design Group Ltd v Douglas and others [2003] IRLR 14 EAT and Canada Life Ltd v Gray & another, EAT/657/03 were wrong on this issue. 

The EAT noted that the issue before it does normally arise in practice: employees on an annual salary are “simply paid seamlessly each month throughout the year”, whether or not they have taken leave in a given month, and the same is mostly true of workers paid weekly. However, where an employee – as in Mrs Fraser’s case – is not receiving his or her ordinary pay due to sickness absence, the issue is relevant. 

The EAT stated that it “might appear somewhat artificial” for an employee who is on sick leave to be required to give notice of an intention that part of that absence should count as holiday. However, it said that this “merely reflects the artificiality of a period of long-term sickness counting as holiday at all”. Without an employee’s notice, an employer paying him or her less than normal pay during the sickness absence will not know whether or not – or when – it is obliged to make any statutory holiday payments. 

The EAT considered whether or not its conclusion is consistent with EU case law, in particular the decision of Pereda v Madrid Movilidad SA [2009] IRLR 959 ECJ, which held that a sick employee must be allowed to take holiday during a later period if he or she so chooses. The EAT held that its decision is consistent with this principle. If Mrs Fraser had made a request to take her statutory holiday after she had recovered, the trust might have been obliged to accede to that request; and if she had not had the chance to take that holiday before her dismissal, it might have been necessary for the EAT to read reg.14 of the Regulations as entitling her to a payment in lieu. However, that was not what happened. 

The EAT also held that there was no general duty on the trust to advise Mrs Fraser of her rights, and dismissed her appeal. 

Additional resources

• Lyons v Mitie Security Ltd [2010] IRLR 288 EAT The Employment Appeal Tribunal has held that a worker who fails to comply with statutory or contractual notice requirements for taking holiday can lose annual leave at the end of the leave year if not taken. The right to take annual leave is not inalienable. 
• Employer defeats holiday claim from long-term sick employee by breaking chain of unauthorised deductions The employment tribunal case of Khan v Martin McColl ET/1702926/09 is believed to be the first decision to consider whether or not a claim for holiday pay for more than one leave year can be defeated by the employer paying the employee's final holiday year entitlement, thereby breaking the chain of unauthorised deductions. As a first-instance ruling, it is not binding on other courts. 

Case transcript of Fraser v Southwest London St George’s Mental Health Trust (on the BAILII website)