Sickness Absence and the Accrual of Holiday Leave Entitlement

Under the EC Working Time Directive, workers are entitled to a minimum of four weeks’ paid leave in each leave year. However, the Working Time Regulations 1998 (WTR), which implement the Directive into national law, entitle workers to a minimum of 5.6 weeks’ paid holiday a year.



In order to ensure that the WTR comply with recent European judgments on the correct interpretation of the Directive, the Government is planning to amend them to enable workers to carry forward four weeks of their statutory holiday entitlement to the next leave year if they are unable to take it in the current year owing to long-term illness. A further case on this topic (Neidel v Stadt Frankfurt am Main) suggests that the Government’s proposed amendment will satisfy the requirements of the Directive.



Georg Neidel, a firefighter in Germany, retired after a long period of sickness absence. His request for payment in lieu of leave not taken was rejected on the ground that German civil and public law makes no provision for financial compensation for leave not taken.



The matter was referred to the European Court of Justice (ECJ), which confirmed that workers in Herr Neidel’s position do have a right to payment in lieu of any untaken holiday they have accrued, but this only relates to the statutory minimum four-week period of paid leave specified in the Directive, even if the member state’s national law entitles workers to a more generous annual leave entitlement. It is up to individual member states whether or not they extend the entitlement over and above the minimum allowed.



On the issue of whether annual leave continues to accrue indefinitely when an employee is on long-term sick leave or whether it can at some point be cancelled, the ECJ ruled that the Directive did preclude a national provision that limited the accumulation of entitlement to leave of a worker who is unfit for work for consecutive reference periods to a carry-over period of nine months.



This follows the ECJ’s ruling in KHS AG v Winfried Schulte that there does come a point when annual leave ceases to have a positive effect for the worker as a rest period and becomes merely a period of relaxation and leisure. A national law that limits the accumulation of entitlement to paid annual leave is not therefore in breach of the Directive. However, any carry-over period must ensure that the worker can have rest periods that may be staggered, planned in advance and available in the longer term, and must be substantially longer than the reference period in respect of which it is granted. In this case, the ECJ held that a period of 15 months was sufficient to ensure that the positive effect for the worker as a rest period was fully achieved.



In Herr Neidel’s case, the nine-month carry-over period was shorter than the reference period of one year and was, therefore, precluded by the Directive.