Sood Enterprises Ltd v Healey UKEATS/0015/12/BI
Appeal against a decision by the ET regarding the amount of holiday pay due to the claimant who resigned following a period of sickness absence and who had not requested holiday during this period. Appeal allowed in part.
The claimant was off sick for part of the calendar year 2010 and during 2011 until his resignation in June of that year. At the time of his resignation, he had taken 11 days holiday in 2010 but none in 2011 and he had not requested any other holiday during this time. He claimed the accrued holiday pay for both years at the ET which amounted to 17 days for 2010 and 14 days pro rata for 2011. It was argued that as the claimant did not ask for holiday in 2010, the holiday entitlement for 2010 did not carry over into the following year. As a fall back position it was argued that if there was to be a carry over then it should be on the basis of 20 days and not 28 days (WTR regulation 13A(7) stipulating that there must be an agreement if additional leave days, as opposed to ordinary leave days, can be carried forward to the following year). The respondent further argued that the claimant was not entitled to payment for 14 days holiday accrued in 2011 as he voluntarily resigned from his employment and so gave up his entitlement to accrued holiday pay. The ET ruled that the claimant was entitled to the days he claimed. The respondent appealed.
The EAT held that only sums due under WTR regulation 13 were due. Regulation 13 A(7) provides that a relevant agreement may provide for any leave to which the worker is entitled under regulation 13A (the additional 8 days entitlement) to be carried forward into the leave year immediately following the leave year in respect of which it is due. In this case there was no such agreement which meant that the claimant was only entitled to carry forward 20 days of holiday into the following year, not 28 and so payment in lieu of holiday pay for the year 2010 was limited to 9 days. Because the claimant's employment terminated in 2011, he was entitled to 28 days pro rata during that year, and the 14 days holiday were left undisturbed.
Appeal No. UKEATS/0015/12/BI
EMPLOYMENT APPEAL TRIBUNAL
52 MELVILLE STREET, EDINBURGH, EH3 7HF
At the Tribunal
On 14 March 2013
THE HONOURABLE LADY STACEY (SITTING ALONE)
SOOD ENTERPRISES LTD (APPELLANT)
For the Appellant MR R SOOD (Director)
For the Respondent MRS S REILLY (Representative)**SUMMARY**
CONTRACT OF EMPLOYMENT - Sick pay and holiday pay
Working Time Directive 2003/88/EC Article 7; Working Time Regulations: holiday pay accrued when on sick leave. The Claimant sought payment in lieu of holiday pay, under WTR 13 and 13A, which he claimed had accrued during a period of illness prior to his resigning from his employment. He sought holiday pay which had accrued in two leave years. He made no request for holiday pay during the first year. The Employment Tribunal found in his favour. The Respondent argued that the Directive was effective only against emanations of the state, and that in any event only sums due under regulation 13 were due. Held that the Directive does have effect only against an emanation of the state; that the regulations can and should be read so as to give effect to the Directive; that Claimant is entitled to payment in lieu of holiday pay for the first year to the extent 9 days; and for the part of the second year in which he was employed, to the extent of 14 days.**THE HONOURABLE LADY STACEY****Introduction**
- I shall refer to the parties as the Claimant and the Respondent. The Claimant appeared in person and his daughter, Mrs Reilly, spoke on his behalf. Mr Sood, a director of the Respondent company, appeared on its behalf. He had appeared in the ET. The Claimant had been represented by a solicitor. The Employment Tribunal found the Claimant entitled to holiday pay under Working Time Regulations (WTR), 13 and 13A during two leave years, calendar years 2010 and 2011, accruing while he was off sick and for which he had made no request during the first leave year. The Respondent appealed. The ET decision was made in November 2011. The appeal was postponed to allow the decision in the Court of Appeal case of [NHS Leeds v Larner ]() EWCA Civ 1034 to be advised. The case concerns WTR as they apply to holiday pay accruing during periods of illness. This is a complicated and evolving area of the law. While I was grateful to parties for the submissions which they made, I was not fully addressed on all issues arising as I would have been had experienced employment lawyers appeared.
- The facts which were not in dispute in this case were that the Respondent ran a business comprising a chain of filling stations and a car wash. The Claimant had been employed as a handyman and car wash worker. The Claimant had worked for the Respondent for some years until he became ill in July 2010, suffering a stroke. He submitted sickness certificates and received sick pay for a period of time. The Claimant did not recover his health sufficiently to resume work. He resigned from his employment on 6 June 2011. He delivered some sickness certificates to his employment by hand as it was therapeutic for him to go out on his own as he began to recover some of his function following the stroke. The Claimant's evidence before the ET was to the effect that he had a conversation with Mr Sood in regard to holidays in December 2010. The RespondentÆs position was that that conversation took place in either March or April 2011. The ET found that it took place in March 2011 as the judge preferred Mr Sood's evidence. The ET found that the date of the conversation had no legal consequence. The Claimant wrote to the Respondent on 6 April 2011 seeking any holiday pay that was due to him for 2010 and 2011. The Respondent replied to the effect that no holiday pay was due unless and until the employment was terminated, at which time accrued holidays would be paid. The Claimant wrote a letter of resignation dated 6 June 2011 to which the Respondent replied in the following terms:
I refer to your letter of 6th of June 2011 and can confirm receipt of your wish to resign your employ which I regretfully accept.
According to my records you have taken 11 days holiday during the last contract year ending December 2010; they are:
1.1.10, 2.1.10, 5.4.10, 26.4.11 till the 30.4.11 inclusive, 1.5.10, 2.5.10 and 31.5.10 which totals in 11 days; you are allowed 5.6 working weeks holidays including bank and public holidays. Therefore you have a balance of 1 working week left which is 6 days at 7 hours per day. Please I will arrange their payment. (sic)
(There is an error in a date in the ET judgment where in paragraph 10 (n) there is a quote from letter from the Respondent. Nothing turns on this.) The Respondent did not make payment to the Claimant for any holiday entitlement during the year 1 January to 31 December 2010 nor for the period 1 January to 6 June 2011. The letter appears to refer to both leave years. No payment was made, despite the offer contained in the last sentence.
- Before the ET it was agreed that the leave year was the calendar year. It was agreed that the Claimant took 11 days holiday out of a 28 day entitlement in 2010, leaving 17 days; that the Claimant's entitlement to holidays for 2011, calculated on a pro-rata basis up to the date of termination of 6 June 2011 is 14 days. It was also agreed that payment in respect of such holidays, if due, should be calculated at the gross rate of 6.10 per hour for a 7 hour day, the Claimant having worked 42 hours a week over 6 days. At the ET there was a claim made by the Claimant in respect of money said to be due in relation to notice. That claim was refused by the ET and there was no cross appeal. That matter is therefore no longer live. The matters in issue before me were whether payment in respect of 17 holidays accrued, but not taken due to long term sickness, in 2010 and 14 holidays accrued to date of termination of employment, but not taken due to long term sickness, in 2011 were due.
- The ET found that the Claimant was unable to take the 17 days of holiday in the leave year 2010 and the 14 days of holidays in the period from 1 January 2011 until 6 June 2011 because he was on long term sickness absence from July 2010. The ET found that the Claimant gave no notice of termination of employment, as he resigned by letter dated 6 June 2011, his resignation to take effect from that date. It found that there was a term of the contract between employer and employee to the following effect:
Where termination of your employment is due to gross misconduct or where the full contractual notice period is not served and worked, unused holiday pay will not be paid, apart from any payment required to meet the statutory minimum holiday obligations.
While the ET made such a finding, it does not appear that the Respondent argued that payment was not due to lack of notice. Rather the Respondent argued that the Claimant had given up his right to holiday pay because he resigned. That is not consistent with the letter referred to above written by the Respondent. The ET found that no request for holiday pay, or to carry over holiday pay was made during 2010. It found that a request for holiday pay for both leave years 2010 and 2011 was made in 2011.**The submissions for the Claimant to the ET**
- The ET noted the submissions of the Claimant to the effect that the Claimant was entitled under WTR 13 and 13 A to holiday pay accruing in 2010 and 2011. Failure to make such payments would amount to an unauthorised deduction from wages. Reliance was placed on the case of HMRC v Stringer  UKHL 31. It was argued that the Claimant had asked for holiday pay during 2011 and while his position was that he had also asked for holiday pay in 2010, even if he did not, he was entitled to holiday pay at the termination of his employment because he was unable to take his holiday entitlement due to illness. The Claimant relied on the European Court of Justice case in the HMRC v Stringer reference. He also relied on the case of Sheraz Khan v MKK Logistics. It was argued on behalf of the Claimant that the case of NHS Leeds v Larner  IRLR 894, decided in the EAT was authority for the proposition that a person who was off sick for the whole of a leave year was presumed not to be well enough to exercise his right to take a holiday and therefore as a matter of law, did not have the opportunity to take annual leave during the relevant year.
- The RespondentÆs submissions were noted to the effect that the entitlement to statutory holidays was 20 days not 28 days. Reference was made to the case of Stringer. It was argued that the European Court of Justice ruling applied only to nationalised companies or other emanations of the state and therefore not to the Respondent. It was argued that as the Claimant did not ask for holiday pay in 2010, the holiday entitlement for 2010 did not carry over into the following year. As a fall back position it was argued that if there was to be a carry over then it should be on the basis of 20 days and not 28 days. The Respondent argued that the Claimant was not entitled to payment for 14 days holidays accrued in 2011 as he voluntarily resigned from his employment and so gave up his entitlement to accrued holiday pay. It was conceded that had the Respondent terminated the Claimant's employment then he would have been due to make payment and would have done so.
- The ET decided that WTR provide that a worker has the right to be paid during the minimum holiday entitlement conferred by regulations 13 and 13A and to receive payment in lieu of unused annual leave at the termination of employment. The ET found that the House of Lords decision in Stringer was authority for the proposition that any alleged failure to make such payments can be enforced by way of a claim for unauthorised deduction from wages. The ET accepted the submission made on behalf of the Claimant that payment should be made for holidays accrued in both 2010 and 2011. It found that the entitlement to statutory holidays is 28 days in each leave year, provided for by regulations 13 and 13A. It also found that it is not relevant for the purposes of the correct interpretation of the legal principles involved that the Respondent is a private company. Reference is made to the ClaimantÆs reliance on Sheraz Khan v MKK Logistics. Relying on the case of Stringer and the case NHS Leeds v Larner (at the EAT stage) the Tribunal found that the Claimant did not require to request holidays or request that his entitlement be carried over in circumstances where he was unable to take them due to being on long-term sick leave. The ET rejected the argument that the Claimant gave up his entitlement to payment in lieu of some or all of the statutory entitlement to holidays by resigning from his employment. The order of the Tribunal was that the Respondent pay to the Claimant a sum of 725.90 in respect of the year 2010 and 597.80 in respect of the year 2001, totalling 1323.70.
- This appeal had been postponed in order that it be argued once the decision of the Court of Appeal in the Leeds v Larner case was available. That decision is now available, as NHS Leeds v Larner  EWCA Civ 1304. As will become apparent the decision leaves open one of the areas which the Respondent argued. The court was advised that clarification of the law was needed, and Mummery LJ gave the leading judgment. He noted that the matter was the subject of differing approaches in cases in tribunals and he noted that both sides hoped that the case would produce more consistency.
- In light of that case, Mr Sood argued that the only leave which an employee is entitled to accrue and obtain as a payment in lieu on termination of employment is as that provided for by regulation 13, that is 20 working days, and only if he has asked for it to be carried over if it refers to a previous leave year. He argued that the case of Leeds v Larner decided that the provisions of the Directive could be enforced only against emanations of the state. He drew my attention to paragraph 45, in which it is stated that the Court of Justice held that Article 7 was directly effective against an emanation of the state. The NHS trust, which was the employer in the case, accepted that it is an emanation of the state. The Respondent in contrast is a private company.
- Mr Sood argued that the regulations required the worker to ask for his holiday pay, and as the Claimant had not done so, it was not due to him. Mr Sood submitted that on the facts, the present case was similar to the case of [Fraser v South West London St Georges Mental Health Trust]()  IRLR 100. In that case it had been held that the employee was able to ask for holiday pay. He argued that the case of Fraser was not in any way contradicted by the case of Leeds v Larner. He asserted that in contrast, in Leeds v Larner the employee was ill with depression and could not ask for her holiday pay to be carried over. In the present case, he said that while he entirely accepted that the Claimant was not fit for the physically demanding work he was employed to do, he was able to walk and talk. He had delivered his own sickness certificates and could have asked for holiday pay to be carried over but did not do so.
- Mr Sood argued that paragraph 22 of Leeds v Larner **showed that the additional holiday pay provided for by regulation 13A was applicable only if there was an agreement between the parties. He pointed out that in paragraph 23 one could see that no point had been taken in that case about additional leave. In paragraphs 57 it was stated that the point about additional leave had been mentioned before Mummery LJ and reference made to a German case in which the court held that a clause precluding payment in respect of additional leave was not precluded by Article 7. In paragraph 58 it is stated that objection was taken to allowing NHS Leeds to argue this point which had not been taken before. In paragraph 61 one could see that no point about a distinction between leave under regulation 13 and leave under regulation 13 A had been taken. While he did not make reference to it, the point which Mr Sood sought to make is set out in paragraph 94 where Mummery LJ states:
The claimant objected to NHS Leeds taking for the first time on appeal the different position under regulation 13 A. That is a new point. No distinction was drawn in the ET or the EAT hearings or decisions between the law governing Article 7 annual leave and additional leave. Anything said by this court would probably be obiter, not binding and open to the significant objection that there are no findings of fact by the ET that might be relevant to it and could affect its proper determination. Until another case crops up, in which it is necessary to reach a decision on the additional paid annual leave, the ETs and their users can derive assistance from the judgment in Neidel.
- Mr Sood made reference to paragraph 64 of the Leeds v Larner case. He argued that the case of Perada v Madrid Movilidad  IRLR 959 referred to in that paragraph was relevant. He argued that the court had found that if the Claimant had the opportunity to exercise the right to leave then that was different from the case of Leeds v Larner whether it was found that the claimant had no such ability.
- Mr Sood noted that in paragraph 90 and 91 of the Leeds v Larner **decision, Mummery LJ considered the regulations. He understood that his Lordship had already decided that the article was binding only on emanations of the state and he argued that what his Lordship said about the regulations was therefore of no relevance. His pithy submission was that the court cannot have its cake and eat it.
- Thus, as I understood Mr SoodÆs submissions for the Respondent, he argued that the Court of Appeal case of NHS Leeds v Larner **held that Article 7 was effective against an emanation of the state only. As the Respondent is a private limited company it does not apply to it. Therefore the Respondent was not due to make payment to the Claimant in respect of holiday pay accruing in the leave year ending 2010. His fall back position was that if the Respondent was due to make payment it was in respect of 20 days of annual leave, not 28 days. While he did not concede that the Respondent was due to make payment of respect of anything for the leave year ending 2011, I understood him to argue that if he was due to pay anything for that year it would be on the basis of 20 days of leave being the total entitlement on which the pro-rata calculation should be made.
- Mrs Reilly explained that she attended the hearing in order that her father might have a voice. He was not able to argue a legal case. She said that she did not know about law but she did know that her father had worked in a low skilled, low paid job and that she was sure that he was entitled to carry over his holiday pay when he had been sick. If she should be wrong about that, then while she accepted that the Respondent was a relatively small company, having between 80 and 90 employees, she argued that in any event any employer should have a duty to tell its employees that they must ask for leave if that is the position. She stated that her own experience of work showed that companies would visit those who were off sick on long-term leave and discuss matters with them. She argued that the Respondent had tried to take advantage of her father by insisting that he should have made a request to have his holiday pay carried over without telling him that such a request was necessary. He had called at the office with his sick lines and he could easily have been told. While Mrs Reilly was not in a position to make reference to any decided cases, I note that the submission she made was discussed in the case of Scally and others v Southern Health and Social Services Board and others  IRLR 522 **which is referred to in the Fraser case, in which the decision was that there was no duty on an employer to notify an employee of any requirement unless there had been an agreement between employer and employee as to the terms and conditions which imported the requirement. Mrs Reilly did indicate that she wished to take issue with the finding in fact that her father had spoken to Mr Sood in 2011 but not in 2010. She accepted however that this had been found as a fact by the ET and that it was too late to seek to change it.
- Mr Healy stated that he felt that he had succeeded at the Tribunal and as far as he understood it, the case decided in Court of Appeal supported his position. Matters had gone on for long enough. He maintained his position that he was entitled to holiday pay in respect of the year leave ending 2010 and the proportion that he had worked of the year leave ending 2011.
- Mr Sood made a brief reply on the submission made by Mrs Reilly and said that his company was a small company which did not go to visit those who were off sick and that he had no requirement to tell people the law.
- This case concerns the WTR which were made under Article 7 of the Working Time Directive, 2003/88/EC. It was postponed in order to have the benefit of the Court of AppealÆs decision in the Leeds v Larner **decision. I was not fully addressed on the law by the parties. I understood that the Respondent's argument was that the decision did not apply to entities which were not emanations of the state. Parties did not address me in any detail on the matter expressly left open by the Court of Appeal decision, that is the effect of the decided cases on additional leave as provided for by regulation 13A. I understood Mr Sood to argue as a fall back position that the Respondent was not bound to make any payment in respect of additional leave. As he put it, it was 20 days, not 28 days that he was concerned with. Neither party sought to argue that any further findings in fact should have been made about the contract between the parties. The case was presented before me on the basis of the interpretation of the regulations.
- It is convenient to note the terms of the article and relevant regulations. Article 7 is in the following terms
- Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave lead down by national legislation and/or practice.
- The minimum period of annual leave may not be replaced by an allowance in lieu, except with the employment relationship is terminated.
- The relevant regulations are 13 to 16, and 26A. They are in the following terms
13 Entitlement to annual leave
(1) Subject to paragraph (5), a worker is entitled to four weeks' annual leave in each leave year.
(3) A worker's leave year, for the purposes of this regulation, begins--
(a) on such date during the calendar year as may be provided for in a relevant agreement; or
(b) where there are no provisions of a relevant agreement which apply--
(i) if the worker's employment began on or before 1st October 1998, on that date and each subsequent anniversary of that date; or
(ii) if the worker's employment begins after 1st October 1998, on the date on which that employment begins and each subsequent anniversary of that date.
(4) Paragraph (3) does not apply to a worker to whom Schedule 2 applies (workers employed in agriculture) except where, in the case of a worker partly employed in agriculture, a relevant agreement so provides.
(5) Where the date on which a worker's employment begins is later than the date on which (by virtue of a relevant agreement) his first leave year begins, the leave to which he is entitled in that leave year is a proportion of the period applicable under paragraph (1) equal to the proportion of that leave year remaining on the date on which his employment begins.
(9) Leave to which a worker is entitled under this regulation may be taken in instalments, but--
(a) it may only be taken in the leave year in respect of which it is due, and
(b) it may not be replaced by a payment in lieu except where the worker's employment is terminated.
13A Entitlement to additional annual leave
(1) Subject to regulation 26A and paragraphs (3) and (5), a worker is entitled in each leave year to a period of additional leave determined in accordance with paragraph (2).
(2) The period of additional leave to which a worker is entitled under paragraph (1) is--
(a) in any leave year beginning on or after 1st October 2007 but before 1st April 2008, 0.8 weeks;
(b) in any leave year beginning before 1st October 2007, a proportion of 0.8 weeks equivalent to the proportion of the year beginning on 1st October 2007 which would have elapsed at the end of that leave year;
(c) in any leave year beginning on 1st April 2008, 0.8 weeks;
(d) in any leave year beginning after 1st April 2008 but before 1st April 2009, 0.8 weeks and a proportion of another 0.8 weeks equivalent to the proportion of the year beginning on 1st April 2009 which would have elapsed at the end of that leave year;
(e) in any leave year beginning on or after 1st April 2009, 1.6 weeks.
(3) The aggregate entitlement provided for in paragraph (2) and regulation 13(1) is subject to a maximum of 28 days.
(4) A worker's leave year begins for the purposes of this regulation on the same date as the worker's leave year begins for the purposes of regulation 13.
(5) Where the date on which a worker's employment begins is later than the date on which his first leave year begins, the additional leave to which he is entitled in that leave year is a proportion of the period applicable under paragraph (2) equal to the proportion of that leave year remaining on the date on which his employment begins.
(6) Leave to which a worker is entitled under this regulation may be taken in instalments, but it may not be replaced by a payment in lieu except where--
(a) the worker's employment is terminated; or
(b) the leave is an entitlement that arises under paragraph (2)(a), (b) or (c); or
(c) the leave is an entitlement to 0.8 weeks that arises under paragraph (2) (d) in respect of that part of the leave year which would have elapsed before 1st April 2009.
(7) A relevant agreement may provide for any leave to which a worker is entitled under this regulation to be carried forward into the leave year immediately following the leave year in respect of which it is due.
(8) This regulation does not apply to workers to whom the Agricultural Wages (Scotland) Act 1949 applies (as that Act had effect on 1 July 1999).
14 Compensation related to entitlement to leave
(1) This regulation applies where--
(a) a worker's employment is terminated during the course of his leave year, and
(b) on the date on which the termination takes effect ('the termination date'), the proportion he has taken of the leave to which he is entitled in the leave year under regulation 13 and regulation 13A differs from the proportion of the leave year which has expired.
(2) Where the proportion of leave taken by the worker is less than the proportion of the leave year which has expired, his employer shall make him a payment in lieu of leave in accordance with paragraph (3).
(3) The payment due under paragraph (2) shall be--
(a) such sum as may be provided for the purposes of this regulation in a relevant agreement, or
(b) where there are no provisions of a relevant agreement which apply, a sum equal to the amount that would be due to the worker under regulation 16 in respect of a period of leave determined according to the formula--
is the period of leave to which the worker is entitled under [regulation 13] [and regulation 13A];
is the proportion of the worker's leave year which expired before the termination date, and
is the period of leave taken by the worker between the start of the leave year and the termination date.
(4) A relevant agreement may provide that, where the proportion of leave taken by the worker exceeds the proportion of the leave year which has expired, he shall compensate his employer, whether by a payment, by undertaking additional work or otherwise.
15 Dates on which leave is taken
(1) A worker may take leave to which he is entitled under regulation 13 and regulation 13A on such days as he may elect by giving notice to his employer in accordance with paragraph (3), subject to any requirement imposed on him by his employer under paragraph (2).
(2) A worker's employer may require the worker--
(a) to take leave to which the worker is entitled under regulation 13 or regulation 13A; or
(b) not to take such leave,
on particular days, by giving notice to the worker in accordance with paragraph (3).
(3) A notice under paragraph (1) or (2)--
(a) may relate to all or part of the leave to which a worker is entitled in a leave year;
(b) shall specify the days on which leave is or (as the case may be) is not to be taken and, where the leave on a particular day is to be in respect of only part of the day, its duration; and
(c) shall be given to the employer or, as the case may be, the worker before the relevant date.
(4) The relevant date, for the purposes of paragraph (3), is the date--
(a) in the case of a notice under paragraph (1) or (2)(a), twice as many days in advance of the earliest day specified in the notice as the number of days or part-days to which the notice relates, and
(b) in the case of a notice under paragraph (2)(b), as many days in advance of the earliest day so specified as the number of days or part-days to which the notice relates.
(5) Any right or obligation under paragraphs (1) to (4) may be varied or excluded by a relevant agreement.
(6) This regulation does not apply to a worker to whom Schedule 2 applies (workers employed in agriculture) except where, in the case of a worker partly employed in agriculture, a relevant agreement so provides.
16 Payment in respect of periods of leave
(1) A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 and regulation 13A, at the rate of a week's pay in respect of each week of leave.
(2) Sections 221 to 224 of the 1996 Act shall apply for the purpose of determining the amount of a week's pay for the purposes of this regulation, subject to the modifications set out in paragraph (3).
(3) The provisions referred to in paragraph (2) shall apply--
(a) as if references to the employee were references to the worker;**
(b) as if references to the employee's contract of employment were references to the worker's contract;
(c) as if the calculation date were the first day of the period of leave in question; and
(d) as if the references to sections 227 and 228 did not apply.
(4) A right to payment under paragraph (1) does not affect any right of a worker to remuneration under his contract ('contractual remuneration').
(5) Any contractual remuneration paid to a worker in respect of a period of leave goes towards discharging any liability of the employer to make payments under this regulation in respect of that period; and, conversely, any payment of remuneration under this regulation in respect of a period goes towards discharging any liability of the employer to pay contractual remuneration in respect of that period.
26A Entitlement to additional annual leave under a relevant agreement
(1) Regulation 13A does not apply in relation to a worker whose employer, as at 1st October 2007 and by virtue of a relevant agreement, provides each worker employed by him with an annual leave entitlement of 1.6 weeks or 8 days (whichever is the lesser) in addition to each worker's entitlement under regulation 13, provided that such additional annual leave--
(a) may not be replaced by a payment in lieu except in relation to a worker whose employment is terminated;
(b) may not be carried forward into a leave year other than that which immediately follows the leave year in respect of which the leave is due; and
(c) is leave for which the worker is entitled to be paid at not less than the rate of a week's pay in respect of each week of leave, calculated in accordance with sections 221 to 224 of the 1996 Act, modified such that--
(i) references to the employee are references to the worker;**
(ii) references to the employee's contract of employment are references to the worker's contract;
(iii) the calculation date is the first day of the period of leave in question; and
(iv) the references to sections 227 and 228 do not apply.
(2) Notwithstanding paragraph (1), any additional annual leave in excess of 1.6 weeks or 8 days (whichever is the lesser) to which a worker is entitled, shall not be subject to the conditions of that paragraph.
(3) This regulation shall cease to apply to a worker from the day when an employer ceases to provide additional annual leave in accordance with the conditions in paragraph (1).
(4) This regulation does not apply to workers to whom the Agricultural Wages (Scotland) Act 1949 applies (as that Act had effect on 1 July 1999).ö
- At the ET the solicitor for the Claimant made reference to the case of Leeds v Larner **at the stage of its being decided by the EAT. He argued that the EAT was correct in finding that an employee who was signed off sick for the whole of a leave year was presumed not to have been well enough to exercise what the European court has described as ôher right to enjoy a period of relaxation and leisureö, and that she was entitled to have payment in lieu of holiday pay under regulation 13. That could be carried over to the following year; and that she had that right without having to make a formal request for the leave to be carried over. The ET accepted that argument, finding at paragraph 47 that:
it is of no consequence that the claimant did not ask for payment of holidays in 2010 and that the claimant and Mr Sood had a conversation when the claimant requested such payment in March 2011. The claimant did not require to request holidays in circumstances where he was unable to take them due to being on long-term sick leave. In those circumstances those accrued holidays carried over to leave year 2011 and the right to payment in lieu of those holidays crystallised on termination of employment. This right applies to the full statutory entitlement to annual leave as set out in regulation 13 and 13 A of the WTR, of which the claimant has entitlement in respect of the agreed element of 17 days for 2010 and 14 days for 2011.
- The ET found at paragraph 43 that the entitlement to statutory holidays is 28 days in each leave a year. It held that regulation 13 A of the WTR sets out entitlement to additional annual leave. It stated:
The claimant's statutory entitlement to holidays was a total period of 5.6 weeks in each leave year, with reference to the WTR regulations 13 and 13 A.
- In paragraph 44 the Tribunal found that
Stringer is binding authority in relation to entitlement to all statutory annual leave, including the additional entitlement set out in regulation 13 A of the WTR. Payment in lieu of holidays accrued under regulation 13 A are wages in the same way that payments in lieu of holidays accrued under regulation 13 are wages.
- In paragraph 45 the Tribunal found that
Stringer is binding on this Employment Tribunal. It is not relevant for purposes of the correct interpretation of the legal principles involved that the respondent is a private company. Reference is made to the claimants reliance on Sheraz Khan -v- MKK Logistics.
- Thus the Tribunal dealt with both points made before it by the Respondent in those paragraphs. It found that the additional leave provided for by regulation 13 A is a statutory entitlement as is the period provided for by regulation 13; it found that the case of Stringer **in the House of Lords is authority to the effect that all statutory annual leave can properly be described as wages and found that such sums can be carried over and paid on termination of employment if the person involved has been ill and therefore unable to take his leave; and it found that that applies to private companies as well as to any emanation of the state.
- In the case of NHS Leeds v Larner  EWCA Civ 1304 Mummery LJ poses the question at paragraph 1 thus:
In what circumstances is a worker, who has not taken paid annual leave in the relevant leave year because of absence from work on long-term 6 leave, entitled to a payment in lieu? Not, one might think, a difficult question or one that would take longer to answer. The short answer to this case is in the final paragraph of this judgment.
The answer given in the last paragraph of his LordshipÆs judgment is that the claimant in that case was entitled to payment in lieu of annual leave having been prevented from taking her paid annual leave because she was sick and that she did not require to make a prior request to have that payment.
- In paragraph 2 of the judgment the following is stated:
The answer depends on the interpretation and application of Article 7 of the Working Time Directive, originally 1993/104/EC, now 2003/88/EC (the Directive). The Working Time Regulations 1998 (the 1998 Regulations), which implemented article 7, must, if it is possible to do so, be interpreted and applied compatibly with it.
In setting out the law, his Lordship notes that the terms of the Directive say nothing about a worker requiring to make any form of request to the employer in order to secure entitlement to carry annual leave forward to a later year. The regulations, beginning with regulation 13 (1) give an entitlement to 4 weeks annual leave each year. That annual leave can be replaced by a payment in lieu only where the worker's employment is terminated. Regulation 13 (9) deals with the entitlement to take leave in instalments as follows:
Leave to which a worker is entitled under this regulation may be taken in instalments, but
(a) it may be only be taken in the leave year in respect of which it is due, and
(b) it may not be replaced by a payment in lieu except where the workers employment is terminated.
On the face of it that regulation appears to require that leave is taken in the year leave to which it applies, and is not carried over. However, in paragraph 37 of the judgment, Mummery LJ helpfully extracts and comments on the points of relevance to the case before him from the preliminary rulings of the Court of Justice in the cases of Stringer v Revenue & Customs and Schultz-Hoff v Deutsche Rentenversicherung Bund ** ICR 932 which were heard together and led to preliminary rulings as follows:
Purpose of annual paid leave
(1) The purpose of annual paid leave guaranteed by EU law is different from the purpose of entitlement to sick leave, which is not governed by EU law. The purpose of the former is to enable a worker to enjoy rest, relaxation and leisure: it is for the protection of health and safety. The purpose of the latter is to enable a worker to recover from illness:  - 
No derogation from principle of paid annual leave
(2) Paid annual leave æis a particularly important principle of Community social law from which they can be no derogation.Æ That is borne out by the terms of Article 7 (2), which only permit payment in lieu on termination of the employment relationship: - The right is granted æto every worker whatever his state of health.**
The opportunity principle and its limits
(3) While it is for the Member States to lay down conditions for the exercise and implementation of the right, they must do so without making the very existence of that right Subject to any preconditions whatsoever  and .
(4) As a general rule, national legislation and practices may provide that a worker on sick leave is not entitled to take paid annual leave during sick leave, æprovided, however, that the worker in question has the opportunity to exercise the right conferred by that Directive during another period:. Equally, national legislation or practices may also allow a worker to take paid annual leave during sick leave:
(5) National legislation may also provide for the loss of the right to paid annual leave at the end of the leave year or a carry forward period, æprovided, however, that the worker who has lost his right to paid annual leave has actually had the opportunity to exercise the right conferred on him by the Directive:. The æopportunity principle is relied on by NHS Leeds in its submissions discussed later.
Right of sick workers to carry forward paid annual leave
(6) It must therefore be held that a worker, whoà is on sick leave for the whole year and beyond the carry-over a period laid down by national law, is denied any period giving the opportunity to benefit from is paid annual leave:. National legislation providing for the loss or extinction of the right in such circumstances at the end of the leave year and/or the carry forward period laid down by national law would undermine the social right directly conferred by Article 7 (1):. That would be the case æeven with the worker has been on sick leave for the whole of the leave year and where his incapacity for work persisted until the end of his employment relationship, which was the reason why he could not exercise his right to annual paid leave:   and .
(7) After termination of the employment relationship, it is, of course no longer possible for a worker to take paid annual leave for which that employer is liable: has ceased to work for that employer. Provision is made in Article 7 (2) for entitlement to an allowance in lieu, but the Article does not expressly laid out in the way in which the allowance must be calculated: and .
(8) with regard to a worker who has not been able, for reasons beyond his control, to exercise his right to paid annual leave before termination of the employment relationship, the allowance in lieu to which he is entitled must be calculated so that the worker is put in a position comparable to that he would have been in had he exercise that right during the employment relationship;[61 i.e. the worker's normal remuneration.
- Mummery LJ went on to consider other European cases, firstly Perada v Madrid Movilidad  IRLR 959 in which a worker became ill at a time when he was due to take paid annual leave. After recovery from his illness he had made a request for a new period of paid annual leave. The Court of Justice held that the worker was entitled to take paid annual leave at a period outside sickness leave even if it fell out with the relevant leave year if he had not had an opportunity to exercise the right to take paid annual leave in the pay year. In the next case, KHS AG v Schulte  IRLR 156 the worker was off sick for a number of years until his employment was terminated. It was held that a collective agreement which applied to his contract and provided that if leave could not be taken because of illness, entitlement to that leave would lapse after 15 months after the end of the reference period, was not struck down because the reference period was shorter than the carry over period.
- The next case discussed by his Lordship, [Dominguez v Centre Informatique du Centre Ouest Atlantique]()  IRLR 321 marks a new development in the interpretation of the directive and the regulations. The claimant was off sick for more than a year following an accident on the way to work. The domestic law required a minimum of one month of actual work in the leave reference year in order to qualify for paid annual leave. The sick leave taken did not count for that purpose because it was for more than one year and was not the result of a work related accident nor of an occupational disease. The Court of Justice held that:
although Member States are free to lay down, in their domestic legislation, conditions for the exercise and implementation of the right to paid annual leave, they are not entitled to make the very existence of that right subject to any preconditions whatsoever.
The court ruled:
It is for the national court to determine, taking the whole body of domestic law into consideration, àand applying the interpretive methods recognised by domestic law, with a view to ensuring that article 7 of the Directive 2003/88 is fully effective and achieving an outcome consistent with the objective pursued by it, whether it can find an interpretation of that law that allows the absence of the worker to be treated as being equivalent to one of the situations covered by that article of the code du travail.
Thus the Court of Justice found that while the Directive did not have direct effect between individuals, including private companies, the domestic law has to be interpreted, if possible, so as to give effect to the directive.
- Mr Sood did not address me specifically on the case of Dominguez. He did however make clear his submission that the Court of Appeal had found that the Directive was effective against an emanation of the state only. He noted that the court had made some remarks about the effect of the Directive on private companies. In my opinion the Court of Appeal has explained the effect of Dominguez as being that there is direct effect against emanations of the state, but also that the domestic law should be interpreted if possible to be compatible with the Directive. This is set out in paragraph 2 of the judgment of Mummery LJ as follows:
The Working Time Regulations 1998 (the 1998 Regulations), which implemented Article 7, must, if it is possible to do so, be interpreted and applied compatibly with it.
- I respectfully agree with his Lordship's determination. I agree, as set out below, with his analysis of the way in which such an interpretation can be made. I am therefore of the opinion, contrary to Mr Sood's submission, that the provisions of the regulations require to be read so as to be compatible with the Directive even where the litigants are private individuals or companies.
- At paragraph 46 in the judgment reference is made to the case of Fraser v South West London and St George's Mental Health Trust (2012) IRLR 100. In that case the employee was off sick from November 2005 until November 2007, when she became fit to return to work, although no work could be made available for her. She was dismissed in October 2008. Thus there was no evidence that the claimant was unable to take the leave in the relevant year. The case is not relevant to the present case.
- The next case to which his Lordship makes references that of Neidel v Stadt Frankfurt am Main  IRLR 607, which is the German case to which Mr Sood made reference. Mummery LJ states that the case has relevance to two matters, being the additional leave question and the question of the request being made for leave. His Lordship helpfully summarises the findings as follows:
55. As regards his reliance on the entitlement in Article 7 (2) to four weeks leave the Court of Justice having cited the principles in Schultze-Hoff held that he was entitled on retirement to an allowance in lieu of paid annual leave not taken because he was prevented from working by sickness. That statement was not qualified by any reference to a mandatory leave request, or even by detailed consideration of whether the worker was unable or unwilling to take the paid annual leave while on sick leave.
56. As regards the provision in national law for forfeiture of leave not taken within nine months after the end of the leave year, the court held that, applying KHS AG -v- Schulte, the carry over period of 9 months was not permissible under the Directive, because it was shorter than the one-year reference period for taking annual leave.
57. As regards the period of additional leave, the position under German law was that a payment in lieu was precluded in respect of the additional period. The Court held that Article 7 did not preclude such provisions of national law where the worker had been unable to use the additional period because he was prevented from working by sickness. In the case of the UK the 1998 Regulations allow the worker to carry forward the additional period, if a ærelevant agreement so provides and then only into the immediately following leave year.
- By regulation 13 A additional annual leave is given in each year subject to a maximum aggregate entitlement of 28 days in each year from April 2009. The annual paid leave may be carried forward by a relevant agreement, in terms of regulation 13 A (7) which is to the following effect:
A relevant agreement may provide for any leave to which a worker is entitled under this regulation to be carried forward into the leave you to immediately following the leave year in respect of which it is due.
- In the case of Leeds v Larner **no separate point was taken before either the ET or the EAT on the interpretation or application of regulation 13 A and there were therefore no findings of fact on that matter. The Court of Appeal did not allow the matter to be raised for the first time before it.
- The court did however require to rule on the question of whether or not a request for leave was required. The discussion of that begins at paragraph 78. In paragraphs 80 and 81 Mummery LJ points out that the Article itself states, without qualification, that every worker is entitled to paid annual leave of at least four weeks. It says nothing of the need for leave request. In paragraph 83 he holds that from the material passages in the judgments one can tell that the purpose of paid annual leave is found to be rest and relaxation whereas the purpose of sick leave is to recover from illness. As regards carrying forward, in paragraph 84 the court finds that the only permissible option under the Directive would have been to allow the Claimant to carry forward an unused paid annual leave entitlement. Such payment can only be made on the termination of the employment which brings to an end the relationship and means that it would not be possible thereafter for the Claimant to take paid annual leave. This is summed up in paragraph 85 when it is noted that a person who is off with a sick line is presumed to be unable to exercise her right to take paid annual leave. This is consistent with the cases such as Schulte and Dominguez. At paragraph 88 his Lordship states:
Mr Ford's essential point is that regulation 15 has no application where a worker is on sick leave and is prevented by sickness from taking paid annual leave during that period of sick leave. I agree with Mr Ford that if, as has been explained, a worker has a right under Article 7 to take annual leave at another time, it would be fundamentally inconsistent with the Article 7 right to take leave at another time outside sick leave, to require the worker to serve a notice or to make a request to take paid annual leave during sick leave. If like the claimant, the worker has not recovered or returned from sick leave and therefore has no opportunity to take that leave at another time, the service of a notice for a period which is not sick leave is not practically possible.
- His Lordship then turned his mind to reading down the 1998 Regulations so as to be compatible with Article 7 as interpreted by the rulings of the Court of Justice. He finds at paragraph 90 that in relation to the carrying forward of unused annual leave regulation 13 (9) would be construed to read as follows
Leave to which a worker is entitled under this regulation may be taken in instalments, but
(a) it may only be taken in the leave year in respect of which it is due, save where the worker was unable or unwilling to take it because he was on sick leave and as a consequence to do not exercise his right to annual leave.
- In paragraph 91 his Lordship notes the position in relation to payment on termination of employment and states that regulation 14 would be read and interpreted to include the following insertion: û
(5) Where a worker's employment is terminated and on the termination date he remains entitled to leave in respect of any previous leave year which carried over under regulation 13(9)( a) because of sick leave, the employer shall make a payment in lieu of equal to the sum due under regulation 16 for the period of untaken leave.
- In paragraph 93 his Lordship states that he was not persuaded of the wisdom of using the appeal as a vehicle for determining the issue of entitlement to additional leave and whether it should be treated in the same way as the four weeks leave under Article 7. In paragraph 94 his Lordship notes that employment tribunals and their users can derive assistance from the judgment in Neidel.
- I note the judgment in the case of Dominguez **at paragraph 24 states as follows
the Court has consistently held that when national courts apply domestic law they are bound to interpreted, so far as possible, in the light of the wording and the purpose of the Directive concerned in order to achieve the result sought by the Directive and consequently comply with at paragraph of Article 288 TFEU. This obligation to interpret national law in conformity with European Union law is inherent in the system of the Treaty on the Functioning of the European Union, since it permits national courts, for the matters within their jurisdiction, to ensure the full effectiveness of European Union law when they determine the disputes it before them
I therefore hold that, adopting respectfully the analysis given by his Lordship that the regulations should be read down so as to apply not only to emanations of the state but also to a private company, for the reasons given by him and by the method expounded by him, that the interpretation of the regulations applies to a private company as it applies to an emanation of the state.
- As regards the additional leave, I note that the decision in the case of Neidel was that domestic legislation which precluded the inclusion of additional leave in the payment in lieu of notice was not prohibited. The court ruled as follows:
Article 7 of Directive 2003/88 must be interpreted as not precluding provisions of national law conferring on a public servant an entitlement to further paid leave in addition to the entitlement to a minimum paid annual leave of four weeks, which do not provide for the payment of an allowance in lieu if a public servant who is retiring has been unable to use that additional entitlement because he was prevented from working by sickness.
- In paragraph 57 of Leeds v Larner, **it is noted that:
In the case of the UK the 1998 Regulations allow the worker to carry forward the additional period if a ôrelevant agreement so provides, and only into the immediately following year.
- That is a reference to the provisions of regulation 13A(7). Thus in dealing with additional leave, Parliament has provided that the facility to carry over may be provided by agreement. The question is whether the employee who has no such agreement, but who has been unable to take leave due to illness, is entitled to carry over. It is clear that the provisions of regulation 13(9) which appear at first sight to preclude carry over require to be interpreted so as to enable carry over if the employee has been prevented by illness from taking his leave, as any other construction would effectively remove the opportunity to exercise the right. The case of Neidel **holds that a domestic provision which lays down conditions for the grant of additional entitlement is not precluded, the court stating at paragraph 36:
Consequently, as it is permissible for Member States to provide, depending on the reason for the worker's absence on sick leave, for a period of paid annual leave equal to or exceeding the minimum period of four weeks leave down in Directive 2003/88 (Dominguez paragraph 50), it is for them, first, to decide whether to confirm public servants an entitlement to further paid leave in addition to the entitlement to a minimum paid annual leave of four weeks, and either provide or not provide further entitlement, in respect of a public servant who is retiring, to an allowance in lieu if that person has been unable to use that additional entitlement because he was prevented from working by sickness, and, secondly, to lay down the conditions for the granting of that entitlement.
- The ET dealt with this matter in paragraphs 43 and 44. It took the view that Stringer is a binding authority in relation to entitlement to all statutory annual leave including the additional element set out in regulation 13 A. The ET noted that:
Payment in lieu of holidays accrued under Regulation 13 A are wages in the same way that payments in lieu of holidays accrued under regulation 13 are wages.
There is no more detail provided of the ETÆs reasoning. The question before the House of Lords in the case of Stringer was whether or not accrued holiday pay was properly described as ôwagesö. The context in which the court required to decide that related to the way in which the matter should be brought before the ET. Reliance has been placed on the EAT case of Sheraz Khan v MKK Logistics in which the speech of Lord Neuberger at paragraphs 66 to 68 in the House of Lords case is quoted. It was held that claims under regulations 14 and 16 of the WTR are claims within section 27 (1) (a) of the Employment Rights Act 1996, that is that such claims relate to ôwagesö. The speech of Lord Rodger of Earlsferry also contains analysis of that question, and he explains clearly in paragraph 25 of his speech that payment made in lieu of holiday pay on termination of employment is properly regarded as wages.
- Regulation 13 A was added to the regulations in 2007. So too was regulation 26A. The regulations as amended provide under regulation 16 that:
A worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulations 13 and regulation 13 A, at the rate of a week's pay in respect of each week of leave.
- Regulation 26 A provides that regulation 13 A does not apply in relation to a worker who has a relevant agreement with his employer to additional annual leave, provided that such additional annual leave may not be replaced by a payment in lieu except on termination and that such additional annual leave may not be carried forward into a leave year other than that which immediately follows the leave year in respect of which the leave is due.
- In construction of the regulations therefore, it is my opinion that Parliament has provided in the regulations before regulations 13 A and 26 A were introduced that leave could be taken only in the leave year in respect of which it was due. That has been construed so as to allow a worker who was prevented from taking his leave by illness to carry leave forward. If he does not return to work due to illness he is then entitled to holiday pay in respect of leave which has accrued. By introducing regulation 13A, Parliament increased the leave to which workers are entitled to 28 days. Regulation 13 A(7) provides that a relevant agreement may provide for any leave to which the worker is entitled under this regulation to be carried forward into the leave year immediately following the leave year in respect of which it is due. By introducing regulation 26A Parliament has provided for recognition of agreement between employer and employee that additional leave be allowed and has provided that such additional leave may not be a carried forward into a leave year other than that which immediately follows the leave year in respect of which the leave is due.
- On the facts of the present case, there are 2 leave years involved. There are no findings in fact that there was any relevant agreement between the parties and so the Claimant is covered by regulation 13A. Regulation 14 sets out a method by which the calculation is to be made of a workerÆs entitlement to leave when he leaves during the course of a leave year and it includes leave which he is entitled to under regulation 13 and regulation 13 A. Regulation 16 provides that a worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 and regulation 13 A. The ET found that the entitlement under both regulations was due for both years. Parliament has provided that additional leave may be carried forward into the leave year immediately following by a relevant agreement between the parties. The case of Neidel is authority for the proposition that it is for the national law to set requirements as it thinks fit for the additional leave. If the construction of the regulations by the ET were correct, it would be necessary to find that regulation 13 A (7) could not be read compatibly with the Directive. In the light of the decision in the case of Neidel I do not agree with such a construction. I agree that holiday pay due under regulation 13 A, that is additional holiday pay, is correctly categorised as ôwagesö; I do not agree that such categorisation settles the question of whether it can be carried over. The regulations provide that it cannot, absent agreement. The case of Neidel **is to the effect that national law may make conditions about the payment of wages in lieu of additional leave. Regulation 13A does so. It must be given effect.
- There was no dispute between parties on the arithmetic carried out by the ET. The two leave years require to be considered separately. In the leave year 2011, the Claimant asked for his holiday pay on termination of his employment. He is entitled to 28 days, with a pro rata reduction in respect of his leaving in the middle of the year. The order by the ET in respect of that year is therefore correct and I refuse the appeal insofar as it relates to that year. In the leave year 2010, I find that there was no requirement for the Claimant to ask for holiday pay during the year. I find however that he was entitled to 20 days under regulation 13 rather than 28 days under regulation 13 A. I therefore allow the appeal to the extent that the sum payable by the Respondent is in respect of 9 (20 - 11) days rather than 17 days. On the agreed arithmetic that amounts to 7 hours x 6.10 x 9= 384.30. Therefore I allow the appeal to the extent of substituting the figure of 384.30 for the figure of 725.90.
Published: 18/07/2013 21:25