Holiday Pay and Long Term Sickness
The long awaited deliberations of the European Court of Justice (ECJ) in the case of Stringer v HMRC are now with us and have caused something of a stir.
Most HR professionals have long accepted that annual leave continues to accrue during sickness absence but the understanding has always been that the Working Time Directive (WTD) does not allow for annual leave to be held over into the next annual leave year; if someone was on long term sick and unable to take their leave, then the leave was lost at the end of the annual leave year.
For example, let us assume that your organisation’s annual leave year runs from 1 January to 31 December. Jo Bloggs is off sick from August and in February you terminate his employment. Jo’s salary in his last month of employment would probably have consisted of his notice period pay and pay for that annual leave which had accrued between 1 January and his date of termination.
As a result of this ECJ ruling Jo’s final salary should also include payment for that annual leave which he was unable to take during the preceding annual leave year. The ECJ said “the right to paid annual leave is not extinguished at the end of a leave year if the worker was on sick leave for the whole of that year, or if he was absent on sick leave for part of the year and was still on sick leave when his employment terminated”.
It therefore also follows that if Jo Bloggs returns to work, he is entitled to take that annual leave he was unable to take in the previous year.
So, we can all celebrate Jo Bloggs’ return to good health and having been off work sick for 7 months, he is now entitled to potentially take weeks of annual leave – or perhaps receive pay in lieu. His colleagues, having covered for his absence, have been unable to carry over any outstanding annual leave and indeed may have lost some of it.
Of course, the WTD does not allow organisations to offer pay in lieu of annual leave in other circumstances but the ECJ ruling appears to suggest that would be acceptable if the individual has been long term sick. “The National Courts can decide whether paid leave can be taken during that year or whether it should be carried over to another year, but either way the employee is entitled to be paid at some point”.
Quite where we go from here remains to be seen. BERR will almost certainly have to amend the WTD to take account of this ruling. In the meantime, astute lawyers will claim unfair deduction of wages if we ignore this ruling.
It is worthwhile noting that this ruling only applies to statutory annual leave entitlement (5.6 weeks from 6th April). If you give additional annual leave, the ruling does not apply to the difference between statutory and contractual entitlements.
Reminder: S88 of the Employment Rights Act 1996 gives employee a ‘right to minimum pay during the notice period’. If you terminate someone’s employment due to long term sickness absence, their final salary should be their full salary and not just sick pay even if they are not at work and contractually they are not entitled to receive pay.
3. Was the conduct on the grounds of the victim’s race (or gender, sexual orientation, religion, belief, age or disability).
These are objective questions which it is usually quite easy to answer during a disciplinary investigation and hearing. The fourth question is more subjective and therefore more difficult to answer
4. If the victim experienced the feelings and/or perceptions, was it reasonable for her/him to have done so?
Mr. Justice Underhill says “if the tribunal feels that the victim was unreasonably prone to take offence, then, even if she did genuinely feel her dignity to have been violated, there will have been no harassment within the meaning of (the law)”.
In this particular case , Miss Dhaliwal, a UK citizen of Indian ethnicity, had resigned from Richmond Pharmacology for reasons unrelated to her subsequent claim of harassment. The case arose out of a comment made during the notice period by Miss Dhaliwal’s manager, “we will probably bump into each other in future, unless you are married off in India”.
The tribunal agreed that the comment was not made with the purpose of violating Miss Dhaliwal’s dignity but nevertheless it did have the effect of doing so. After considerable deliberations around Question 4, the tribunal found in Miss Dhaliwal’s favour and awarded her £1,000 in compensation; a figure which perhaps reflects the Tribunal’s views as to the reasonableness of Miss Dhaliwal’s reaction.
Richmond Pharmacology appealed the decision for a range of legal reasons but EAT dismissed the appeal, finding in Miss Dhaliwal’s favour.
£1,000 may not be a great deal of money to pay out in compensation but the cost to Richmond Pharmacology in terms of legal fees and time expended on the case would have been substantial.
It is perhaps also worthwhile remembering that claims of harassment can be brought against both the organisation and the individual who perpetrated the harassment. It is not unusual for compensation to be awarded against both respondents where two (or more) have been named.
Organisations can help to protect themselves by ensuring that all staff have been trained and should keep audit trails in order to prove that any named respondent has been trained. Having a policy document is simply not enough, however well disseminated it is.
In this particular case Richmond Pharmacology could perhaps have done more to prevent or stall this successful claim. Miss Dhaliwal was dissatisfied with the response of her grievance; a thorough investigation and proper action on the outcome of the investigation may have prevented the dissatisfaction. Alternatively, mediation may have settled the dispute to everyone’s satisfaction.
Cullen Scholefield offer both mediation and training in all the issues covered in this newsletter report.
