NHS Leeds v Larner

The Court of Appeal held that Article 7 of the Working Time Directive (now 2003/88/EC), as directly effective against an emanation of the State, protects a worker on long-term sick leave from losing the right to paid annual leave at the end of the reference leave year. Where a worker has been prevented by sickness from taking annual leave during the leave year, the worker is entitled to have that leave carried forward and, if the employment terminates before it can be taken, to a payment in lieu calculated so as to put the worker in the position they would have been in had they taken the leave.

The court rejected the employer's submission that the worker must make a prior request to take or carry forward the leave as a precondition of entitlement. The judgment applied and followed the relevant Court of Justice rulings (including Stringer and Schultz-Hoff) and concluded that no mandatory leave request is required where sickness has prevented the worker from taking the leave.

The claimant, Mrs Janet Larner, was absent on sick leave throughout the leave year 1 April 2009 to 31 March 2010 and did not take or request to carry forward any paid annual leave. Her employment was terminated in April 2010 and NHS Leeds refused to pay her in lieu for the untaken leave that accrued in 2009/10. The claimant brought a claim under the Working Time Directive (Article 7) as implemented by the Working Time Regulations 1998, seeking payment in lieu for the untaken 2009/10 leave.

(i) Nature of the claim: the claim sought payment in lieu of untaken paid annual leave accrued during a leave year in which the claimant was continuously absent on sick leave.

(ii) Issues framed:

• Whether entitlement to paid annual leave accrued during sick absence and could be carried forward where the worker had not taken it.
• Whether a prior request by the worker to take or carry forward leave was a necessary precondition to entitlement.
• Whether payment in lieu on termination must put the worker in a comparable position to having taken the leave during employment.
• Whether additional leave under regulation 13A should be treated differently.

(iii) Court’s reasoning: the court analysed Article 7 and the relevant rulings of the Court of Justice (notably Stringer, Schultz-Hoff, Pereda, KHS v Schulte, Dominguez and Neidel). It held that Article 7 confers a minimum four-week paid annual leave right that cannot be made subject to preconditions which would deprive a worker of the opportunity to enjoy rest and leisure. Where sickness prevents exercise of the right in the leave year, the worker must be given an opportunity to take the leave at another time; if termination occurs before that opportunity, a payment in lieu is due and must be calculated to place the worker in a comparable position. The court found no requirement in Article 7 or in the Court of Justice jurisprudence for a worker to have made a prior request to carry forward leave where the worker was prevented by sickness from taking it. The court declined to decide in this appeal the separate and undeveloped issue of additional leave under regulation 13A, noting the recent Neidel decision was informative on that point.

The appeal by NHS Leeds was dismissed and the EAT and Employment Tribunal decisions in favour of the claimant were upheld.

Appeal dismissed. The court held that Article 7 of the Working Time Directive, directly effective against NHS Leeds as an emanation of the State, entitles a worker prevented by sickness from taking annual leave in a leave year to have that leave carried forward and, if the employment terminates before it can be taken, to a payment in lieu calculated to put the worker in the same position as if the leave had been taken. No prior request to carry forward or take the leave was required where sickness made exercise of the right impossible.

This appeal was from the Employment Appeal Tribunal decision (Bean J) dismissing NHS Leeds's appeal against the Employment Tribunal reserved judgment of 14 December 2010. The EAT decision was given on 1 July 2011 and reported at [2011] IRLR 894. Permission to appeal to the Court of Appeal was granted by Elias LJ on 10 October 2011. The present judgment of the Court of Appeal is [2012] EWCA Civ 1034 (25 July 2012).