ECJ ruling restricts holiday accrued during sick leave

Further to our previous article 'Holiday and sickness issues back in the spotlight' the ECJ has now published its judgment in the case of KHS AG v Schulte. In a short judgment the ECJ has gone further than the Advocate General’s Opinion and concluded that a national provision or practice, such as a collective agreement, which limits a carry over period to 15 months for the taking of holiday accumulated on sick leave may be lawful under EU law.

The ECJ judgment states that the right to paid annual leave, as laid down by the Working Time Directive, has the dual purpose of enabling the worker both to rest from carrying out the work he is required to do under his contract of employment and to enjoy a period of relaxation and leisure. The right to paid annual leave by a worker who is unfit for work for several consecutive annual leave periods can reflect both the aspects of this purpose only in so far as the carry over does not exceed a certain temporal limit. Beyond such a limit annual leave ceases to have its positive effect for the worker as a rest period and is merely a period of relaxation and leisure. Therefore a worker cannot have the right to accrue paid annual leave indefinitely.

The ECJ stated that the 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. Any carry over period must be substantially longer than the annual leave reference period in respect of which it is granted. That carry over period must also protect the employer from the risk that a worker will accumulate excessive periods of absence and from the related difficulties for the organisation of work planning.

The carry over period in the relevant collective agreement was a 15 month period for workers who could not take their holiday entitlement because of sickness during the relevant annual leave year. The 18 month carry over period considered by the AG was a long stop (set out in an ILO Convention) after which the purpose of the leave entitlement may no longer be fully achievable. A period of 15 months for carrying over the right to paid leave was determined by the ECJ as compatible with the underlying purpose of the right, i.e. that it ensured that the right retained its positive effect for the worker as a rest period.

Although this judgment is not directly applicable to UK employers it will be welcomed as a pragmatic decision which will help to provide clarity on this aspect of holiday and sickness issues.

This article first appeared in Law-Now, CMS Cameron McKenna's free online information service, and has been reproduced with their permission. For more information about Law-Now, click here.