Thackray Williams

The House of Lords have ruled that workers can claim holiday pay even when they are on long-term sick leave. This ruling has been eagerly awaited since the European Court of Justice held in January of this year, that workers do accrue holiday pay during long-term periods of sick leave, and therefore must be allowed to take accrued outstanding holiday upon their return to work or be paid in lieu of it (in the event their employment has ended).

The consequence of this ruling is that workers who are denied holiday pay while on sick leave can bring a claim in the Employment Tribunal for unauthorised deduction from wages under the Employment Act 1996. The House of Lords have confirmed that this ruling overrides the UK’s existing Working Time Regulations, which requires employees to use all holiday in the year that it is accrued or lose it.

The effect of this decision is that a worker can take advantage of the more generous time limits available to claims for unlawful deductions from wages – which is within three months of the last in a series of deductions, consequently allowing a claim to go back further than three months, in the event the underpayments form part of a series.

This decision will be a blow for companies who have employees or workers that have gone off on long-term sick leave, as they will now be able to accrue holiday.

So, what does this mean for employers?

Following this decision there is concern that companies will suffer serious financial and practical ramifications under this ruling, in what is essentially already a difficult economic climate. What is of real concern is that this ruling leaves the door open to back-dated pay claims, which could be disastrous for smaller and medium-sized businesses.

There may be scope to limit financial damage in these circumstances and therefore if you are concerned about this ruling, you should not hesitate to contact a member of our Employment Department, who will be able to advise you further. 

For more information contact Emma Thompson on 020 8290 0440 or email: emma.thompson@thackraywilliams.com