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24th November 2011

Employee on long-term sickness absence only entitled to statutory holiday pay upon request

In the recent case of Fraser v South West London St George’s Mental Health Trust, the Employment Appeal Tribunal (EAT) held that employees are only entitled to statutory holiday pay under the Working Time Regulations if they take statutory holiday or give notice to their employer that they wish to take such holiday.

The above case related to the long-term sickness absence of an employee and the EAT noted that employees on long-term sick leave do not necessarily relinquish their untaken statutory holiday entitlement at the end of each leave year (in accordance with the decision in the European case of Pereda v Madrid Movillad SA), however, if a sick employee wishes to defer taking their statutory holiday to another leave year, they must make a request to their employer in this regard. Accordingly, as the claimant in the above case (Mrs Fraser) had failed to make any such request, her untaken statutory holiday entitlement extinguished at the end of each leave year. Therefore, she was not entitled to payment in respect of it when she was dismissed.

The facts of the case were that Mrs Fraser, who was employed by South West London St George’s Mental Health Trust (the Trust) as a nurse, went on long-term sick leave in November 2005 and did not return to work before her dismissal in October 2008. After the termination of her employment, the Trust paid Mrs Fraser in lieu of her final leave year’s statutory holiday entitlement, as required by the Working Time Regulations. It did not, however, make a payment to her in lieu of her untaken holiday entitlement for the previous two leave years. In response to this, Mrs Fraser brought a holiday pay claim before an employment tribunal.

During the proceedings, the Trust accepted that, under the provisions of the Working Time Regulations, Mrs Fraser had accrued the right to take statutory holiday during the two years in question. However, it argued that she had been obliged to give notice to her employer to exercise that right. As she had not given such notice, her right to take statutory holiday had extinguished at the end of each leave year. Accordingly, it was argued that when her right to take the holiday extinguished, so did her right to be paid in respect of that entitlement.

At first instance, the employment tribunal agreed with the Trust’s argument and rejected Mrs Fraser’s claim. In response, Mrs Fraser subsequently appealed to the EAT.

The EAT agreed with the findings of the employment tribunal and rejected Mrs Fraser’s appeal.  In explaining its decision, the EAT stated that the policy of the Working Time Regulations was that employees should take annual holiday in the interests of their health and welfare.  It went on to say that if employees were not entitled to be paid while taking statutory holiday, then they would be discouraged from exercising their entitlement.  However, the EAT did not believe that it was right for employees to receive statutory holiday pay where they have not taken holiday. If they did, they might effectively receive double payment for a period of work.

Further to the above, the EAT also noted that, under regulation 13(9) of the Working Time Regulations, the general rule was that employees should use their statutory holiday entitlement before the end of the relevant leave year. If they do not, they lose their entitlement and cannot be paid in lieu of it.  Accordingly, the EAT accepted the tribunal’s basic reasoning in this case, that an employee should not be entitled to statutory holiday pay without giving notice to take holiday.

The EAT also held that it was clear from the Pereda case that, as far as the Working Time Directive is concerned, an employee on sick leave has a choice: to take statutory holiday (and be paid in respect of it) while off sick, or to request that the holiday to be deferred. Therefore, if Mrs Fraser had wanted to defer taking her statutory holiday until her return to work, she should have asked the Trust to allow this. As she did not do so, regulation 13(9) of the Working Time Regulations applied, meaning that her entitlement to statutory holiday (and to corresponding holiday pay) lapsed at the end of each leave year.

In response to the above, Mrs Fraser argued that, if she had been obliged to give notice under the provisions of the Working Time Regulations in order to receive holiday pay, then the Trust had been in breach of contract for failing to inform her of the notice requirement.  The EAT rejected this argument and stated that Mrs Fraser’s right to take statutory holiday arose “as a matter of general law and not of contract”. Accordingly, the EAT did not believe that there was any duty placed on an employer to advise employees of their rights under general law.

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