As is well known, the general rule is that employees must either take their full holiday entitlement during the holiday year in which it accrues or else forfeit the right to any holiday not so taken. Under the Working Time Regulations 1998, a worker has no right to carry untaken holiday forward to the next year; nor can a worker in that position claim pay in lieu either, unless his employment has ended.
However, there is an important exception to these general rules. Within the last few years European case law has established that if a worker is unable to take annual leave because of long-term sickness absence, he or she accumulates the right to take that leave on returning to work (or pay in lieu if their employment is terminated) – even if that return is not until the next leave year.
In a German case currently before the European Court of Justice, the Court is examining just how far that exception can be taken. The case (KHS v Winfried Schulte,  EUECJ C-214/10) has not yet been decided by the full Court, but an Advocate General has handed down an opinion in the case which is generally in favour of employers.
Herr Schulte had been absent from work on long-term sick leave for over six years when KHS, his employer, finally terminated his employment in August 2008. He brought a claim before the Dortmund Labour Court seeking payment in lieu of the annual leave he had accrued in the years 2006-2008. He won and KHS appealed.
The German Appeal Court noted that, under the terms of an applicable collective agreement, Herr Schulte’s accrued holiday rights for 2006 and 2007 had expired. However the Court was unsure whether this agreement was actually lawful: specifically, was it legitimate for national law and/or collective agreements to provide for the expiry of accrued holiday right entitlements of workers who were absent on long term sick leave, given the EU case law and the EU Working Time Directive?
The German appeal court referred this question to the EU Court of Justice, and on 7 July the matter came before Advocate General Trstenjak.
She took note of International Labour Convention No.132, Articles 8 and 9 of which envisage that, where entitlement to annual leave is “interrupted”, the remainder of the annual holiday (with pay) should be taken “no later than eighteen months from the end of the year in respect of which the holiday entitlement has arisen”. AG Trstenjak considered that this would be an appropriate period during which a worker returning to work should be able to exercise the right to take untaken holiday (it would, of course, be open to any EU Member States to allow for a longer period of entitlement).
Her reasoning appears to be that:
- pay in lieu of holiday is not compensation for loss of rights, and so need not be available indefinitely;
- the health and safety objective of annual leave is to allow the worker time to recuperate;
- that aim is most effectively met when the leave is taken during the holiday year in which it arises;
- it is in the worker’s interest to be speedily reintegrated into the workforce after long-term absence: this would be undermined if a long period of annual leave were added on to a long period of sick leave;
- if the accumulation of entitlement to annual leave is unlimited, this could act as an incentive to employers to dismiss seriously ill workers sooner rather than later.
An ECJ Advocate General’s opinion is, of course, not binding on the full Court but will be considered seriously by it and – more often than not – will be followed. However, it does open up the serious possibility that the European Court will rule that there is a limit to the period during which a worker who is absent on long term sick leave can claim entitlement to holiday rights, perhaps with 18 months as the appropriate long stop period.