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Case Note: NHS Leeds v Larner [2012] – Payment in Lieu of Untaken Holidays

Tuesday, 11 December 2012

The Court of Appeal has determined that employees on long-term sick leave are entitled to carry over their statutory minimum leave to a later period. Additionally, for the purpose of terminating an individual’s employment, the untaken leave will entitle the employee to payment in lieu of that leave.
This has clarified an area of employment law where inconsistencies have existed for some time.

Case Facts
NHS Leeds v Larner centred on the case of a woman employed by NHS Leeds as a clerical officer who went on paid sick leave in January 2009. The sick leave continued until April 2010, at which point she was dismissed.

During 2009, the employee did not have the opportunity to take any of the statutory minimum four weeks annual leave (provided for in Article 7 of the EU Working Time Directive). She therefore claimed payment in lieu of that leave when she was dismissed in 2010. NHS Leeds argued that she had not requested the annual leave in 2009 or asked for it to be carried over and so was not entitled to payment in lieu of it upon her dismissal in 2010.

The Court’s Ruling
In the original hearing, a tribunal found in favour of the employee; NHS Leeds appealed in the EAT and then in the Court of Appeal. The Court of Appeal dismissed the appeal on the basis that the employee was entitled to be paid for the untaken annual leave because she had not had the opportunity to take it. The fact that it had neither been requested nor had the employee asked for it to be carried over had no bearing on the employee’s right to be compensated for it.

The judgment confirms that employees do accrue holiday pay while on sick leave. As employees can claim payment in lieu of annual leave if their employment it terminated, this case means that they may also claim for annual leave they were previously unable to take due to their absence through sickness.

The case was brought against the NHS, considered an emanation of the state, meaning that Article 7 could be directly enforced against it. However, the Court of Appeal suggested that the Working Time Regulations could be interpreted to give the same effect against private employers if it were necessary.

The implications are beneficial for employees but may be costly for employers who should be careful to draft employment contracts to limit their liability to statutory annual leave allowances.
If you would like further information regarding this case or need legal advice in relation to any Employment matters, Rollingsons has experienced lawyers who can advise you. Please contact Aneil Balgobin via e-mail or by telephone on 0207 611 4848.