The decision of the Court of Appeal in the case of NHS Leeds -v- Mrs Janet Larner in July 2012 is an important authority dealing with the right of a worker to be paid in lieu of annual leave, when s/he has been unable to take it having been off sick. Although it is not a recent decision, its ramifications are still filtering through. In particular, it is important to understand the decision when considering the dismissal of an employee for incapability on the grounds of ill health.
Background
Mrs Larner was employed by NHS Leeds. She was absent on sick leave for the whole of the leave year 2009/2010. During that year she neither took paid annual leave, nor did she request NHS Leeds to carry it forward to the next leave year (2010/2011). Very early on in that year, she was dismissed. NHS Leeds refused to pay her for the leave that she had not taken in 2009/2010. They argued that since she had not made a request to carry forward the leave during the leave year, she had lost her right to do so. The claimant pursued her case under Article 7 of the Working Time Directive, implemented into UK law by the Working Time Regulations 1998 (the 1998 Regulations).
In this case, it was held that Article 7 had direct effect against NHS Leeds since it was to be regarded as an emanation of the State. However, the court made it clear that it believed that the 1998 Regulations should be interpreted in a similar fashion in relation to any private employer.
Mrs Larner had been dismissed before she had returned to work and whilst she remained on sick leave. NHS Leeds may have terminated her employment just a few days after the expiry of the holiday year on 31st March 2010 in order to try and avoid having to pay that holiday entitlement. The court made it clear that NHS Leeds had a duty to pay a sum in lieu of holiday pay in respect of the leave year 2009/2010, even though Mrs Larner had not submitted a request for this to be carried forward.
Conclusion
Dismissals on the grounds of incapability arising from ill health are difficult to handle. There are pitfalls at every turn. The process is a long one; Mrs Larner was on sick leave from January 2009 until 6th April 2010 having been diagnosed with Chronic Fatigue Syndrome and Depression. During her sickness absence she received six months full pay. She then went on to half pay which ran out in January 2010. It is not clear whether NHS Leeds contemplated dismissing her earlier. However, it is evident that even though she was not entitled to be paid beyond January 2010, Mrs Larner was still accruing holiday entitlement and would continue to do so until she was dismissed. The continuing accrual of holiday pay needs to be carefully considered by the employer when managing these situations.