The Government is currently consulting on an amendment to the Working Time Regulations 1998 (WTR), which implement the EC Working Time Directive into national law. The change will 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. This is necessary in order to ensure that the WTR comply with recent European judgments on the correct interpretation of the Directive.
A further decision on this topic has now been handed down by the European Court of Justice (ECJ) (KHS AG v Winfried Schulte). At issue was 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 case concerned a German locksmith who had suffered a heart attack which left him seriously disabled. On termination of his employment, he lodged a claim for the payment in lieu of 35 days’ annual leave for each of the years 2006 to 2008. The employer argued that Mr Schulte’s entitlement to leave for 2006 and 2007 had lapsed. The collective agreement in place provided that the entitlement to leave of a worker on long-term sick leave lapsed fifteen months after the end of the relevant leave year. The German court referred two questions to the ECJ for a preliminary ruling. Firstly, whether Article 7(1) of the Directive must be interpreted as precluding national provisions or practices, such as collective agreements, which limit the accumulation of entitlements to such leave of a worker who is unfit for work for several consecutive reference periods – in this case to a carry-over period of 15 months – on the expiry of which period entitlement to paid annual leave lapses. Secondly, if the answer to that question is ‘no’, must the possibility of carrying over leave entitlement exist for a period of at least 18 months?
The ECJ held that whilst national law cannot provide that a worker’s right to paid annual leave will lapse without them having had the opportunity to exercise that right, the right to accumulate such leave is not without limits. The dual purpose of the right to such leave under the Directive is to enable a worker to take a rest from work and to enjoy a period of relaxation and leisure. But beyond a certain point, annual leave ceases to have a positive effect for the worker as a rest period and becomes merely a period of relaxation and leisure. In answer to the first question, therefore, a national law that limits the accumulation of entitlement to paid annual leave is not 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. It must also protect the employer from the risk that a worker will accumulate leave over too long a period and from the problems this would cause with regard to the organisation of work.
In the ECJ’s view, a period of 15 months is sufficient to ensure that the positive effect for the worker as a rest period is fully achieved. In view of this decision, there was no need for the ECJ to consider the second question.
In light of this decision, it is to be hoped that the Government will provide clarification on exactly how our national rules should operate with regard to this tricky area of the law.