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Holidays – Use it or lose it – even on long term sick leave?

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Yes said the EAT (Underhill P) in Fraser v St George’s NHS Trust unless the employer agrees for it to be carried over to the next year.

Workers continue to accrue annual leave entitlement during sickness absence, and workers can choose to take annual leave at the same time as being absent due to sickness and be paid for it. But notice to take annual leave must be given to the employer to be entitled to payment for holiday pay whilst on sick leave. If notice is not given in the leave year then the holiday entitlement will be deemed as unused and will be lost. It cannot be carried over unless the employer agrees to this.

In this case Ms Fraser was injured at work. She was on sick leave for four years until her dismissal. For the last two complete years of her employment she received no pay. On the termination of her employment she sought 4 weeks holiday pay in relation to each of those two years. She did not seek it in respect of the year in which she was dismissed as accrued holiday pay for that year was rightly paid by her employer.

In the light of Stringer v HM Revenue & Customs Commissioners [2009] ICR 932 there was no doubt that the employee had accrued the right to leave during the years in question. However, the employer argued that if she wanted to exercise that right she had to give notice to the employer under Reg 15 (1) of the Working Time Regulations and she had not done this.

The EAT held that an employee is only entitled to holiday pay under Reg 16 (1) if he/she has actually taken the leave to which the pay relates and as Ms Fraser had not done so in accordance with the WTR by giving notice pursuant to Reg 15, her claim failed. In other words, use it or lose it. In reaching this decision, the EAT decided that some of the earlier decisions on this issue in the EAT were wrong.

The EAT also held in this case that there was no obligation on the employer to notify its employee of the fact that if they do not exercise their right to holiday during the leave year, then they will lose it or in the case of an employee on sick leave not be paid holiday pay.