24th July 2015


 Issue No.  2015/12




The whole topic of holidays has led to a voluminous amount of case law dealing with entitlement and pay. This ranges from the rolled up holiday pay (which is technically illegal but will be accounted for when considering claims), to holiday accrual when a worker has been or is absent from work due to sickness and more recently to the calculation of holiday pay and factoring in commission and overtime (see our Information Updates: 2011/21, 2012/10, 2012/13, 2014/09, 2014/17, and 2015/01). 

And here we go again… yes we’ve had some more case law!!! (Just in time for the main summer holiday season).

Holidays and Sickness

It is well established, that holiday entitlement continues to accrue when an employee is absent due to sickness.  If an employee requests to take annual leave, whilst off sick, that is perfectly permissible.  However, if an employee does not request to take holiday, it continues to accrue to be taken once they have returned to work, or be paid for upon termination of employment.  If the employee is prevented from taking the holiday within the holiday year due to sickness, an employer has to allow the employee to carry forward the holiday into the subsequent holiday year.

By way of reminder, the carry forward of holidays only applies to the four weeks’ leave granted by the original Working Time Regulations (Reg. 13) and not the additional 1.6 weeks leave introduced later (under new Reg. 13A) which the EAT has already ruled is not eligible for carry forward.

The issue being considered in a recent case is whether an employee has to show he was unable, by reason of illness, to take holiday. The background is that the Claimant was a printer, who had been absent from work for four years following an accident. Upon dismissal he sought payment for 60 days' accrued holiday for 2010, 2011 and 2012.  The Employment tribunal dismissed the claim because the claimant did not demonstrate that his medical condition was the reason he did not take his leave. 

The Employment Appeal Tribunal overturned the Tribunal’s decision, concluding that there is no requirement for a sick employee to take annual leave during the leave year or to show he was unable, by reason of sickness, to take the leave.  The EAT went on to consider whether accrued holiday should carry forward indefinitely, but concluded (taking into account EU case law) that national law is not required to allow holidays to carry forward without limit.  Consequently, the EAT, effectively rewrote the Regulations, by requiring a worker to take annual leave within 18 months of the end of the leave year in which it was accrued. After the 18 month carry over period any outstanding untaken leave is presumably forfeit.

The effect in this case was that the Claimant was entitled to payment in lieu of annual leave for 2012 but not for the holiday accrued in 2010 and 2011.  Permission has been granted to appeal to the Court of Appeal and we wait to see if an appeal is lodged and the outcome of any such appeal.

Are we any further forward?

Regrettably not much!  We need to await further case law.

So when will holidays be forfeit?

So, in what circumstances would any holidays not taken, be forfeit?

Questions – in the following scenarios are holidays likely to be forfeit or be carried over into the subsequent holiday year?

  1. A worker does not apply or take his/her full holiday entitlement in the holiday  year.
  2. A worker applies to take his holiday in the final month of the holiday year (e.g. December) but because December is the employer’s busy period and holidays are not permitted to be taken in that month, the holiday request is refused.
  3. A worker applies to take his holiday in the final month of the holiday year but because holidays are granted on a ‘first come, first served’ basis and due to other employees having already booked the time off, the holiday request is refused, to maintain minimum staffing levels/operational requirements.
  4. A worker booked holiday which was agreed but the employer asks the worker to cancel the holiday due to work activity/operational requirements, which the worker agreed, but the worker was not able to take the time off before the end of the holiday year.

Providing there is no contractual term that provides for holidays, above the statutory minimum, to be carried forward into the subsequent holiday year, we believe that holidays should be forfeit in scenarios (1), (2) and (3) above.  (4) is arguable, but we sympathise with the worker in this scenario and believe that a fair and reasonable employer would allow the holiday to be carried forward into the subsequent holiday year. 

However, if you deprive a worker of carryover of the holiday entitlement, the worker might challenge that decision before the Employment Tribunal and the reality of the situation, is that it will be for an Employment Judge to determine on the facts of each and every case. 

Finally - a reminder…

On a more positive note, you may remember that one of the significant problems arising from the holiday (commission/overtime) pay cases, workers could potentially seek to recover the ‘series of underpayments’ to their previous holiday pay payments going back to when they joined their current employer, or to 1998 when the Working Time Regulations came into force.  But hold tight - two crumbs of comfort exist:

Firstly, the EAT have said that claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments (subject to the reasonable practicability test); and

Secondly, the Deduction from Wages (Limitation) Regulations 2014, (effective 8th January 2015) put a limit on unlawful deductions claims to two years before the date the claim is lodged.  This limiting piece of legislation only applies to Tribunal claims presented on or after 1st July 2015: so any new holiday pay claims lodged at the Employment Tribunal on or after 1st July 2015 can only claim for any underpayment going back two years.





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