NHS Leeds v Larner
| Jurisdiction | England & Wales |
| Judge | Lord Justice Mummery,Lord Justice Tomlinson,Mr Justice Henderson |
| Judgment Date | 25 July 2012 |
| Neutral Citation | [2012] EWCA Civ 1034 |
| Docket Number | Case No: A2/2011/1953 |
| Court | Court of Appeal (Civil Division) |
| Date | 25 July 2012 |
[2012] EWCA Civ 1034
Lord Justice Mummery
Lord Justice Tomlinson
and
Mr Justice Henderson
Case No: A2/2011/1953
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE EMPLOYMENT APPEAL TRIBUNAL
THE HON MR JUSTICE BEAN
UKEAT/0088/11/CEA
Royal Courts of Justice
Strand, London, WC2A 2LL
MR SEAN JONES QC (instructed by Ford & Warren) for the Appellant
MR MICHAEL FORD (instructed by Thompsons Solicitors) for the Respondent
Hearing date: 27 th March 2012
Introduction
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 sick leave, entitled to a payment in lieu? Not, one might think, a difficult question or one that would take long to answer. The short answer to this case is in the final paragraph of this judgment.
On this appeal the specific point is whether the Employment Tribunal (the ET) erred in law in holding that the claimant Mrs Janet Larner, whose employment was terminated by NHS Leeds after her prolonged period of sickness absence throughout and beyond the whole of the preceding year, was entitled to be paid in lieu of the annual leave which she had neither taken in that leave year nor requested to carry forward to the following leave year, in which she was dismissed. 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.
The key facts could not be simpler. The appellant NHS Leeds employed the claimant. She was absent on sick leave for the whole of the leave year 2009/10. During that year she neither took paid annual leave nor did she request NHS Leeds to carry it forward to the next leave year (2010/11). Very early on in that year she was dismissed. NHS Leeds refused to pay her for the leave not taken by her in 2009/10.
The claimant queried why she had not been paid in lieu. Her case under Article 7 and the 1998 Regulations again could not be simpler: she had the right, without prior request, (a) to carry forward to 2010/11 the paid annual leave accrued, but not taken, during her period of sickness absence in 2009/10 and (b) to be paid, on the termination of her employment in April 2010, in lieu of that untaken leave.
Contract does not come into her case under Article 7 or into the defence of NHS Leeds. The contractual conditions of employment are part of the narrative, but the contract is subject both to the legislation in Article 7, which has been held to have direct effect as against NHS Leeds, and to the 1998 Regulations.
Both the ET and the Employment Appeal Tribunal (EAT) found for the claimant. This appeal is from the order of the EAT dated 1 July 2011. It dismissed the appeal by NHS Leeds against the reserved judgment of the ET (Employment Judge Keevash, sitting alone) sent to the parties on 14 December 2010. The ET held that NHS Leeds had made unlawful deductions from the claimant's wages and that it had acted in breach of the 1998 Regulations by not paying her, on the termination of her employment, wages in lieu of the paid annual leave that had accrued while she was on sick leave throughout 2009/10. There was originally an issue about untaken leave in the earlier leave year 2008/09, but that claim was treated in the EAT as withdrawn. It is not a live point on this appeal.
On 10 October 2011 Elias LJ granted permission to appeal on the grounds that the appeal was arguable and raised a point of some importance.
Entitlement to paid annual leave and to payment in lieu on termination of employment matter a great deal to employers and workers alike. Both sides need to know where they stand, preferably without having to go to the Court of Appeal, or all the way to Luxembourg, to find out how the law works. The rule of law, in its practical application in the workplace, should ensure that, as far as possible, the legal rules are certain, clear and accessible by the people for whom the rules were made. It does not help them for the courts to complicate the law and to make it even more difficult to work out what it is and what it means in practice.
We were informed that not all ETs have been taking the same approach to paid annual leave rights on termination of employment after an extended period of absence on sick leave. Both sides hope that this case will produce more consistency.
Narrative
From 17 April 2000 NHS Leeds employed the claimant as a clerical officer on a 20-hour week. Her leave year ran from 1 April to 31 March in each year.
Her conditions of employment did not prevent her from taking paid annual leave during a period of absence on sick leave. They stated that annual leave would accrue during paid and unpaid sick leave, but the combined annual leave must not exceed 20 working days in one year. It was stated that:—
"The carry forward of any annual leave must be for service delivery reasons and may only be authorised by the relevant Director having already been discussed and agreed by your Head of Service. The matter should be discussed before returning to work from sick leave."
The conditions said nothing about the need for an express request by the employee, either during the period of sick leave or before the end of the leave year, to carry forward to another leave year any untaken entitlement to paid annual leave.
Guidelines issued in May 2004 advised the staff of NHS Leeds to ensure that they had taken all their annual leave for the year by the end of March and that leave could only be carried into the next year in special circumstances and to apply in writing, if they felt that that applied to them. A later Bulletin (January 2006) stated that annual leave could not be carried into the following year "unless in exceptional circumstances and a written request has been submitted and approved."
On 5 January 2009 the claimant went on sick leave. She never returned to work. She was later diagnosed with chronic fatigue syndrome (ME) and depression. She had no pre-arranged holiday. She took no holiday whilst off-work sick, being, according to her evidence, "too ill to do so", "never [feeling] well enough" and not even thinking of holidays She was absent throughout the leave year 1 April 2009 to 31 March 2010. During sickness absence she received 6 months' full pay. She then went on to half pay, which ran out in January 2010.
During the year 2009/10 the claimant made no request to NHS Leeds to take paid annual holiday or to carry forward (or "carry over", or "roll over", as sometimes said) untaken leave into the next year. NHS Leeds asserted that, had the claimant made a request to take paid annual leave after her sick pay ran out in January 2010, it would have been granted. The main case for NHS Leeds is that, as the claimant made no request to take or carry forward leave, her entitlement to it and to payment in lieu lapsed at the end of the leave year. The ET and the EAT should have disallowed her claim for payment in lieu.
0n 8 April 2010 NHS Leeds sent a letter to the claimant informing her of the decision to dismiss her with effect from 6 April 2010 on grounds of incapability due to her continuing ill-health. The letter stated that a payment in lieu of notice and any outstanding leave would be made to her. NHS Leeds eventually paid her the correct sum representing the compensation due for the proportion of untaken holiday due for the 2010/11 leave year. The payment did not include any compensation for the untaken paid leave for the 2009/10 leave year.
The claimant says that the payment in lieu should cover her unexercised entitlement to paid annual leave in the previous year. The basis of her claim to carry forward untaken leave is that Article 7, as interpreted in repeated rulings of the Court of Justice, entitles a worker, who is unable to take paid annual leave because of sickness, to take that untaken leave at another time when the worker is not absent on sick leave, if necessary in a subsequent leave year. Further, the amount of the payment due to the claimant on termination of her employment for untaken paid leave must place her in the same position as if she had exercised the right to take her paid annual leave during her employment.
NHS Leeds opposes the claim in this, the third round of legal argument, insisting that it was for the claimant to make a request, either to take her paid annual leave during her period of sickness absence, or to carry it forward. She did not make the requisite request. Her entitlement to paid annual leave was lost. Her right to pay in lieu on dismissal was extinguished. The position of NHS Leeds on holiday pay (and payment in lieu) is pithily put: "Use it or lose it." The claimant's response is less punchy, as it depends on quarrying EU jurisprudence for rulings on the interpretation of Article 7. The Court of Justice released another ruling after the hearing of this appeal, while these judgments were still in preparation.
The law
The 1998 Regulations, as amended, implement the right to paid annual leave originating in Article 7 of the Directive, which provides that:—
"1. 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 laid down by national legislation and /or practice.
2. The...
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