Page last updated at 14:48 GMT, Tuesday, 20 January 2009

Sick leave staff win holiday case

The case came to the ECJ having been to the House of Lords

Employees on long-term sick leave are entitled to take all holiday they have accrued when they return to work, the European Court of Justice has ruled.

If workers were sacked or left a firm, they must receive holiday pay equivalent to the time they were unable to take while ill, the judges added.

The verdict clears up years of dispute over whether holiday rights accrued are lost after prolonged illness.

Critics say the ruling could deal a blow to many employers.

'Real blow'

"If employees never return to work - which is usually the case on long-term sickness cases - they accrue that holiday which is then paid out as a lump sum on termination of employment," said Fraser Younson, head of the employment group at lawyers Berwin Leighton Paisner.

This potentially could make integrating an employee back to work and balancing workloads extremely difficult
Tim Marshall
DLA Piper law firm

"This is a cost which many employers, especially smaller firms, can't afford, particularly in the economic climate."

Meanwhile the business group, the CBI, described the ruling as "a real blow to firms trying to keep jobs alive during the recession".

"Businesses themselves also suffer when staff take sick leave, and we had hoped that a compromise could have been achieved over unused holiday time," said the CBI's director of HR policy, Katja Hall.

"Instead, at a time when the economy is struggling, this judgment will ensure that staff are away from the workplace for longer, and it will create a headache for HR departments, who will have to review their policies and contracts."

The ruling means that somebody who was away from work for two years could then be entitled to at least 40 days of leave, plus public holidays, observers said.

This is because under the ECJ ruling, employers must give staff a reasonable chance to take holiday they accrued while off sick.

"Besides the financial burden, this potentially could make integrating an employee back to work and balancing workloads extremely difficult," said Tim Marshall, partner and UK head of employment at DLA Piper.

Reconsider arrangements?

The case was brought by five employees at Her Majesty's Revenue and Customs in the UK and a worker from Deutsche Rentenversicherung Bund in Germany - a pensions and insurance organisation.

They had argued that under European law they were entitled to holiday time whilst they were unable to work due to illness.

Under the European Working Time Directive, workers have a "right to a minimum period of paid annual leave".

"A worker does not lose his right to paid annual leave which he has been unable to exercise because of sickness. He must be compensated for his annual leave not taken," the ruling said.

Such liabilities may encourage employers to think twice before providing long-term sick arrangements for their staff in the future, Mr Younson said.

However, the ruling said that staff away on long-term illness could not automatically benefit from annual paid leave while absent from work.

The decision is likely to mean the British government, and employers, will have to recognise this more strict interpretation of employment law, says BBC correspondent Chris Mason in Brussels.

The UK workers, employed by Her Majesty's Revenue and Customs brought the case under the Working Time Directive, which stipulates, under Article 7, a right to a minimum period of paid annual leave.

The Working Time Directive was first adopted at an EU level in 1993; the UK implemented it in 1998.

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