Under the Working Time Regulations 1998 all workers are entitled to 4 weeks’ paid annual leave (WTR leave). This entitlement to WTR leave will rise to 5.6 weeks’ in April 2009.

In the case of Stringer and others v HM Revenue and Customs (previously known as Ainsworth v HMRC), it had previously been decided by the Court of Appeal that a worker on long-term sickness absence does not accrue WTR leave during that absence. Many would think this was a sensible decision, and that it would be completely illogical if a worker who is not working because of ill health is at the same time able to accrue paid holiday.

However, the European Court of Justice (“ECJ”) delivered its own decision this week, and decided that:

• a worker who is on sick leave for the whole or part of the annual leave year does continue to accrue WTR leave, despite not being at work
• at the end of a leave year, a worker on sick leave who has been unable to take WTR leave must be allowed to carry it over
• the right on termination of employment to be paid in lieu of WTR leave applies even if the worker has been on sick leave for the whole or part of the leave year.

The ECJ did, however, rule that it is for individual Member States to decide whether a worker can elect to take their annual leave during a period of sick leave or whether it should be carried over to another year, but either way the employee is entitled to be paid at some point.

This thorny issue will now be considered by the UK House of Lords. In the light of the ECJ’s decision, it is likely to overturn the Stringer decision. The Working Time Regulations 1998 will also need to be reviewed, as they currently expressly preclude any carry-over of holiday into a subsequent leave year.

A further update will be issued once the final judgment is delivered by the House of Lords.

If you have any queries or would like more information, please contact Johanne Cosgrove.