Entitlement to Holiday Pay Whilst on Sick Leave – Fraser v Southwest London St George’s Mental Health TrustMonday, November 14th, 2011
There have been no shortage of UK and European cases in the last few years relating to the awkward issue of an employee’s entitlement to holiday pay whilst on sick leave. However, the case of Fraser v Southwest London St George’s Mental Health Trust appeared a relatively simple one.
Mrs Fraser had an accident in November 2005 and was paid sick pay until August 2006, when her entitlement ceased. In November 2007, she was certified as fit to return to work, though not in her previous role as a nurse. The Trust resumed paying her in November 2007, though were unable to find work for her to do, therefore, ceased paying her in March 2008, dismissing her in October that year. The Trust’s holiday year ran from April to March and Mrs Fraser was paid in lieu of her untaken entitlement for the 2008/09 holiday year (April to October 2008). No payment was made to her for the holiday years 2006/07 and 2007/08.
As a result, Mrs Fraser made a claim to the Tribunal for an unlawful deduction from wages and non-payment of her statutory holiday entitlement under the Working Time Regulations 1998 (WTR).
As the Employment Appeals Tribunal (EAT) did in their ruling, it is worth pointing out what the relevant Regulations are within the WTR legislation:
This Regulation provides the right for four weeks’ WTR annual leave, to be taken in the leave year it is due and provides for the additional 1.6 weeks’ leave to be carried forward to the next leave year
A section within it provides that leave cannot be substituted for a payment in lieu, except in the circumstances that an employment is terminated. Therefore, the term ‘use it or lose it applies.
This Regulation deals with the situation where an employment is terminated part-way through a leave year. In the instances where the pro-rata entitlement, under Regulation 13, differs from the amount of leave taken, 14 allows for a payment in lieu of leave
This concerns the process of fixing the leave dates between employee and employer. 15 says that any leave accrued under Regulation 13 must be requested ‘by giving notice’ to the employer
This says that an employee is entitled to be paid for any WTR leave that they are entitled to
According to outgoing EAT President, Sir Nicholas Underhill; there was no doubt that Mrs Fraser had accrued the right to the leave under Regulation 13 and the right for it to be paid under Regulation 14. However, to exercise those rights, she was obliged to give notice to her employer under Regulation 15. She did not do so and, therefore, Mrs Fraser was not entitled to payment.
In representing Mrs Fraser, it was argued that the fact she had not actually ‘taken’ or requested her annual leave in the relevant years was not the issue. It pointed to two other cases, List Design v Douglas and Canada Life Ltd v Gray, where the only consideration was that the employees had built up an entitlement to the leave under Regulation 13.
The EAT in the Fraser case came to the ‘firm conclusion’ that both of these decisions had been incorrect and were ‘wrongly decided’. It said that the actual reason for the Working Time Regulations’ requirement for statutory leave to be taken was so that health and safety interests were addressed. If a payment was made in lieu of the leave, there is no incentive to take it and no health a safety benefits are derived. Simply, it is not right for an employee to receive a payment for leave that they have not taken. This is totally consistent with the ruling in Kigass Aero Components v Brown, where the EAT held that an employer makes a payment under Regulation 16 for WTR leave actually taken.
Further, the EAT’s ruling in the Fraser case is consistent with a Court of Justice of the European Union (CJEU) ruling in Pereda v Madrid Movilidad SA. In this case, the CJEU ruled that the purpose of paid leave under the WTR is to allow the worker to rest and to enjoy a period of relaxation and leisure. In making a comparison, it was clear that an employee on sick leave could either request to take and be paid for WTR leave or make a request that the holiday entitlement be deferred. Mrs Fraser did neither in each of the two years in question. As a result, her entitlement under Regulation 13 was forfeited.
Arguing again for Mrs Fraser, it was claimed that the Trust had been in breach of contract by failing to advise her of the Regulation 15 obligation (to give notice). This was based upon another piece of case law Scally v Southern Health and Social Services Board. This ruled that employers are required to inform employees where there are contractual benefits which they can use.
The EAT rejected this comparison, saying that the statutory holidays under the WTR was ‘a matter of general law and not of contract’, and there is no duty on the employer to give advice to employees of their entitlements under the law. Simply, the employer had no obligation to make the employee aware that notice was required.
This should be a judgement that is welcomed by employers, as it appears to put to rest any uncertainty that may have existed following previous rulings. It does seem clear now that, whilst an employee may be entitled to the leave, if it is not requested, there is no entitlement for it to be paid by the employer. Plus, there is no obligation on the employer to make the employee aware of this.
However, is it as simple as that, and will this put paid to claims for past holiday pay in the circumstances that an employee has had a long spell of absence through sickness?
What about the NHS Leeds v Larner ruling in June this year? In this case, the EAT ruled that Mrs Larner did not forfeit her Regulation 13 entitlement to leave , even though she did not request it to be carried forward to the following year as she had been ‘presumed not to have been well enough to exercise this right’. Fraser does appear inconsistent with Larner in that, completely opposite conclusions were reached!
The Larner case is going to the Court of Appeal – possibly after this ruling, we will know which of the decisions we have to take into account in our working lives.