CBI update on House of Lords judgment in HMRC vs Stringer and others

The House of Lords’ decision in HMRC vs Stringer and others has been widely reported. The implications are still not completely clear, but this note seeks to outline the Lords’ main recommendations and what these could mean for employers:

1.       What did the Lords decide? The Lords’ decision dealt solely with the issue of whether workers who are denied holiday pay due under the working time regulations (WTR) or a payment in lieu of holiday on termination, can pursue a claim to an employment tribunal (ET) for unauthorised deduction from wages. The Lords unanimously ruled that they can. This means that a number of questions left open after the recent ECJ judgement have been answered:

•         Do workers continue to accrue holidays under the WTR during sick leave? Yes.
•         Can workers take WTR leave during sick leave? The ECJ decision made it clear that it was up to member states how to deal with this question. If member states do not allow workers to take WTD leave during sickness absence however, they must allow the individual to carry forward any holiday accrued and take it when they return to work, even if they do not return until the subsequent year. An employer can give notice to a worker to prevent him/her taking leave on particular days, but there is nothing in the WTR that prevents leave from being taken during sickness absence.

2.       What does the ruling mean for employers?

•         Employers should allow workers to take paid leave even during sickness absence. If the worker requests leave in accordance with the WTR whilst off sick, he or she should be paid for it.

3.       What should an employer do if a worker does not choose to take their annual leave? A number of options are open to employers:

•         Do not pay in lieu/do not carry-over: here, an employer could argue that the leave entitlement lapses if not officially requested by the worker in the holiday year in which it accrues. This approach could risk claims being made alleging a failure to make reasonable adjustments under the DDA, less favourable treatment on the grounds of maternity and breach of the duty of trust and confidence.
•         As option 1, but allow for carry-over in exceptional circumstances: a more flexible approach, allowing carry-over when an employee is suffering a severe long-term illness, for example.
•         Insist all leave entitlement is exhausted in each leave year, with the employer nominating dates if necessary: a cautious approach. Workers would be told to take leave in a year when they are off sick. If they decline to nominate dates then the employer could nominate dates for them and pay up. An employer could technically insist on the worker taking leave before the sick pay runs out. However, this runs the risk of breach of contract unless this right is spelt out upon engagement, and could lead to employees bringing disability discrimination claims. It may also be viewed as not in keeping with the spirit of the WTR.

I hope this clarifies the main outcomes of the judgment. Please feel free to contact me should you require any further information.