The long awaited judgment of the European Court of Justice in Stringer and Others v HMRC (formerly the Ainsworth case) has just been given. The ECJ rules that, under the Working Time Directive, employees continue to accrue holiday throughout sick leave, irrespective of the length of such leave, and that they are entitled to payment in lieu of such leave (if it has not been possible to take it) on the termination of employment. The ECJ also allows member states to decide whether national legislation entitles an employee on sick leave to take paid annual leave during that sick leave.
The Judgment is clear on principle. However, it is short on detail and we think that the UK government will now have to amend the Working Time Regulations to clarify the necessary detail and give the Judgment practical application.
For example, if employees are offered the choice of taking holiday while on sick leave practical issues will arise. We assume full holiday pay will be paid and any sick pay suspended, but how will this impact on SSP and can sick leave and holiday leave run concurrently?
If employees are unable to take their holiday, carry it forward and are ultimately paid out on termination of employment, what rate of pay is applicable? Is it the rate prevailing on termination of employment or the rate prevailing when the holiday actually accrued? The judgment addresses this question but does not answer this clearly.
This judgment, especially in conjunction with the Institute of Directors' warning that the UK's new equality and business regulations will cost UK firms at least £1 billion a year, is unwelcome for employers. Employers with generous long-term sick pay schemes, paid out of their own pockets, are likely to review their sickness policies. Even employers with permanent health insurance schemes will want to review such arrangements as the end costs of keeping employees on long-term sick leave may now be considerable. Employers of workers with a history of long-term sickness will doubtless lobby the Government over the detail of the UK amending legislation.
The judgment is immediately effective for public sector employers but private sector employers can wait until at least the House of Lords (the referring court) makes a decision and probably until the Government amends the regulations. Most employers therefore have time to consider their policies and perhaps even implement changes before the law changes.
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The original publication date for this article was 21/01/2009.