CJEU Ruling on Holiday Pay for Employees on Long-term Sick – KHS AG v Winfried SchulteThursday, November 24th, 2011
The Government consulted on amendments to the UK Working Time Regulations earlier in the year. These are the Regulations which implement the European Working Time Directive (WTD). Specifically, the Government’s consultation had much to do with recent rulings in the UK and Europe about holiday pay and how it is influenced when an employee is on long-term sick. The consultation stated that it was necessary for the UK Regulations to be consistent with the Directive, as they were interpreted by Europe. Another ruling last week may influence the decision on any amendments. It is regarding the above case, which stems from Germany and has been covered in our Newsletter before.
Mr Winfried Schulte was absent from work through sickness from 2002 to 2008. He claimed his contractual leave entitlement for the three holiday years from 2006 to 2008, when he was terminated. A German court ruled that he was entitled to his accrued holiday, though restricted the accrual to the statutory minimum leave (rather than his contractual entitlement). It also expressed an ‘Opinion’ that, where leave is carried over, there should be a time limit of 18 months, during which time the leave should be taken. The employer appealed the decision and the court referred the case to the Court of Justice of the European Union (CJEU) for a ruling.
Last week, the CJEU handed down its decision. It stated that although a worker may be unable to take their annual leave under the WTD, allowing them to take the accrued leave years later was not in accordance with the Directive’s intention. This intention was for the worker to be able to enjoy a period of paid rest and relaxation suffered as a result of the activities of work. In the instances of an employee who is ‘unfit for work for several consecutive years’, the CJEU ruled that, whilst statutory leave can be carried over, the accrued and untaken leave will be lost if it is not taken 15 months after the end of the relevant leave year.
Given that the right to accrue statutory holiday leave whilst on sick leave has already been established in case law, this ruling is important for the UK as:
- it introduces us to the concept of employers having to carry over statutory leave, plus
- it caps this ‘carry over period’ at 15 months. However, this is only in the circumstances that an employee has been ‘unfit for work for several consecutive years’
It is now time for Government to amend the Regulations in light of this new ruling, as employers will seek clarity on how to comply with their obligations under the European Working Time Directive. In the meantime, it is clear that employers are not in a position to be able to refuse the carry-over of leave, but only in the circumstances that applied in this case. Does this mean that we should be reviewing our policies or internal procedures – possibly not yet, but soon?