Are You Sick & Tired of Sickness?
Tuesday, February 24th, 2009Just when UK plc is busy fighting its own economic Battle of Waterloo what does the European Court of Justice (ECJ) do? Does it send in the elite ECJ economic crack troops, “Prussian reinforcements under Blucher stylee” ,at the final hour and help strike the decisive blow against the rear echelons of the economic recession? No! The ECJ militia rabble eventually turn up at the wrong battleground and when they finally stumble across the chaos and smoke at Waterloo they open up fire upon their Allies.!!
Employers throughout the UK must be banging their collective heads against the nearest hard fixture in response to the latest collective outpouring of lunacy from the ECJ in relation to holidays and the Working Time Regulations.
Given the current economic climate, the last thing UK employers wanted was an ECJ Artful Dodger creeping up on them in the economic recession hustle and bustle and relieving them of the silver pocket watch heirloom and increasing employment costs. Unfortunately, the recent European Court of Justice’s decision in Stringer and Others v HM Revenue and Customs, does just that.
In a nutshell, the ECJ amazingly held that workers on long-term sick leave accrue statutory annual leave throughout the sickness period and have to be paid for it at their normal rate of remuneration, even if their sickness persists for the whole of the relevant leave year. Furthermore, where sickness absence means that accrued leave is not taken by the time employment is terminated, the worker must be given a payment in lieu at his or her normal rate of pay.
So, in short an employee can be off sick for 11 months, return to work and then pretty much take the next month off on full holiday pay. Even worse an employee could potentially be off for the full calendar year and roll over their full holiday entitlement into the next year, 56 days holiday! On the face of it, the ECJ logic that the Working Time Regulations entitle an employee to paid holidays and a break from the rigours and demands of work, whereas a sickness period is in its purest form is not a “holiday,” seems sound in principle. But where the logic is seriously flawed is that the real truth is that many employees on long term sickness have periods of rehabilitation involving holidays, days away with families etc. How these periods of “rehabilitative holiday” differ from “normal holidays under the Working Time Regulations” is difficult to square.
Another problem is that the ECJ judgment suggests that employers must allow workers on long-term sick leave to carry over their unused leave entitlement into the following leave year. However, Reg 13(9)(a) of the WTR expressly provides that the basic four weeks’ leave (but not the additional leave under Reg 13A) may only be taken in the leave year in respect of which it is due. In other words, the Working Time Regulations specifically prohibit carry-over.
Until the House of Lords gives judgment, the position will remain uncertain. We would suggest that the safest course for employers is to permit workers on long-term sick leave to take a notional period of paid annual leave before the expiry of the current leave year.
Like every employment entitlement, this Judgment will also encourage abuse by a number of employees and their relevant advisors, as the longer an individual remains off sick the more holiday they can then take at the end of that illness period. I caveat this with the defensive statement that most employees on sickness absence are suffering from genuine illness problems. Unfortunately the ECJ Judgment will have a “cry wolf” impact, with employers being incredibly sceptical of employee illness.
Many Unions and employees will herald and welcome the ECJ Judgment. We feel that this is something of a pyrrhic victory celebration with the most obvious consequence being that it provokes employers to dust off their ill-health capability dismiss manuals and start policing long term sickness far more rigorously, whereas they may have, previously, erred on the generous in relation to allowing employees time to “recuperate” from serious injuries.
Another issue for Unions and employees alike is in regards to the huge issue left unanswered by the Judgment, namely where employers have arranged generous Permanent or Catastrophic Ill Health Insurance with third party providers to cover employees who are unable to work due to debilitating ill-health conditions. The Ruling leaves open the potential for these individuals to accrue holiday period during the periods they are covered by the Insurance and effectively “top-up” their Insurance payments with an additional payment from their employer to cover their “notional” holiday periods.
The ruling also leaves several questions unanswered. The Court held that national legislation or practices which allow a worker to take paid annual leave during sick leave are not contrary to the Directive. However, as long as a worker is receiving sick pay, it will usually be to his or her advantage to postpone annual leave until the contractual sick pay period runs out, or until he or she is back at work. In these circumstances, it is unclear whether the employer can instead oblige the worker to take annual leave concurrently with sick leave, even though the worker may be unable to derive any meaningful benefit from a holiday.
Uncertainties also arise in relation to permanent health insurance (PHI) schemes, which require an employee to remain on the books in order to receive benefits. In a long line of cases, it has been held that an employer cannot dismiss without good cause where the effect would be to deprive the individual of the right to PHI benefits. If the House of Lords decides that workers can exercise the right to paid annual leave during sickness absence, this will presumably require employers or insurers to top up the PHI benefit to the level of full salary for the relevant period.
A final salutory warning to all employers borne on this Judgment is ensure you speak to an employment law advisor, identify and parcel out any additional contractual holiday over and above the statutory entitlement and clearly detail what an employee can and cannot do with this surplus.