Appeal No. UKEAT/0088/11/CEA

EMPLOYMENT APPEAL TRIBUNAL
58 VICTORIA EMBANKMENT, LONDON EC4Y 0DS

	At the Tribunal
	On 29 June 2011

Before
THE HONOURABLE MR JUSTICE BEAN
(SITTING ALONE)

NHS LEEDS	APPELLANT

MRS J LARNER	RESPONDENT

Transcript of Proceedings

JUDGMENT

REVISED

	

APPEARANCES

For the Appellant	MR BEN DANIEL
(of Counsel)
Instructed by:
Ford & Warren Solicitors
Westgate Point
Westgate
Leeds
LS1 2AX
	
For the Respondent
	MS NAOMI CUNNINGHAM
(of Counsel)
Instructed by:
Messrs Thompsons Solicitors
Churchill House
17 Wellington Street
Leeds
LS1 4DL

SUMMARY
WORKING TIME REGULATIONS – Holiday pay

The entitlement to paid annual leave of a worker absent for the whole of a pay year through sickness does not depend on the worker submitting a request for that annual leave before the pay year ends.

THE HONOURABLE MR JUSTICE BEAN
Introduction
1.	It might be thought that a worker’s entitlement to paid annual leave conferred by the Working Time Regulations does not arise when he or she has been absent for the whole pay year through sickness. That was what the Court of Appeal thought in Inland Revenue Commissioners v Ainsworth [2005] ICR 1149.  They pointed out that to hold otherwise would have the undesirable consequences that employers will be less likely to keep sick employees on the books, and, fearing that outcome, employees may feel driven to return to work before they should.  However, the Ainsworth case was referred to the European Court of Justice by the House of Lords, and after the usual two‑year delay the oracle at Luxembourg, in the form of a Grand Chamber of thirteen judges, gave an unusually clear and decisive answer (Stringer v HMRC [2009] IRLR 214).  The Grand Chamber held that the Court of Appeal were entirely wrong.  Annual leave entitlement accrues during a period of sick leave.  The issue in this case is whether, if the worker does not submit a request for that annual leave before the pay year ends, she forfeits the entitlement.

The facts
2.	The facts of the case are not in dispute. The Tribunal summarised them as follows:

“6.1 On 17 April 2000, the Claimant was employed by the Respondent as a Clerical Officer.  At all material times, she was employed to work for 20 hours per week.
6.2 In or about May 2005, the Respondent gave the Claimant her Statement of Particulars.  This provided:-
	‘Accrual of benefits during sick leave.
	Annual Leave
Employees will accrue annual leave during paid sick leave.  They will also accrue annual leave whilst they are on unpaid sick leave; however, the combined annual leave must not exceed 20 working days in one year.
The carry forward of any annual leave must not 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.  This matter should be discussed before returning to work from sick leave.’
6.3 In 2005, the Respondent gave the Claimant a document entitled Guidelines for Child Health Staff 2005 which stated:-
	‘…
	Leave
	…
•	Ensure that you have taken all your annual leave for the year by the end of March.  Leave can only be carried into the next year in special circumstances – apply in writing to … if you feel this applies to you.’
6.4 In or about January 2006, the Respondent gave the Claimant a document entitled Child Health Bulletin – January 2006 which stated:-
	‘…
•	Annual leave cannot be carried into the following year unless in exceptional circumstances and a written request has been submitted and approved.’
6.5 The Respondent’s holiday year runs from 1 April to 31 March.  Full time employees (working 37.5 hours each week) with more than 5 years but less than 10 years service were entitled to 29 days annual leave plus 8 days for public holidays.  The Claimant worked 20 hours each week.
6.6 On 05 January 2009, the Claimant began a period of absence due to sickness.  She received sick pay at the rate of full pay for 6 months and half pay for 6 months.
6.7 When the Claimant began her sickness absence, she did not have any pre-arranged holiday.  During 2009 and 2010, she did not make any requests to take holiday.
6.8 During her sickness absence, the Claimant attended regular meetings with her Departmental Manager and HR in an attempt to secure her return to work on redeployment.  She also attended meetings with occupational health.
6.9 On 06 April 2010, the Respondent decided to dismiss the Claimant with immediate effect on grounds of incapability due to ill health.  By letter dated 08 April 2010, the Respondent informed the Claimant of the decision and stated that ‘a payment in lieu of notice and any outstanding leave will be made to you.’  

3.	It was accepted by the employers before the Tribunal (indeed, it was the unchallenged evidence of their witness) that, if the Claimant had made a request for 28 days’ paid annual leave after her sick pay ran out in January 2010 (for example, for the last 28 working days of the pay year), it would have been granted.  But Mr Daniel, for the employers on this appeal, argues that, since no request was made, the entitlement to leave was lost at the end of the pay year both as a matter of contract and under the Regulations.

The law
4.	The Working Time Regulations 1998 implemented the Working Time Directive in English law. The Court of Appeal has held, in Gibson v East Riding of Yorkshire Council [2000] ICR 890 and British Airways PLC v Williams [2009] ICR 906, that the Working Time Directive is not directly effective in English law; so one must look to the text of the Regulations.  

5.	Regulation 13(1) provides that (subject to paragraph (5), which is immaterial for present purposes) a worker is entitled to four weeks’ annual leave in each leave year.  This must now be read in conjunction with regulation 13A, introduced by amendment in 2007, which increases the leave entitlement to 28 days with effect from April 2009.  Regulation 13(9) states:

“Leave to which a worker is entitled under [Regulation 13] 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.”

6.	And by regulation 15(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).”

7.	Regulation 15(2) provides for what may conveniently be called an employer’s counter‑notice.  Paragraphs (3) and (4) of the regulation give further details of what the notice and any counter‑notice must contain.  Paragraph (5) reads:

“Any right or obligation under paragraphs (1) to (4) may be varied or excluded by a relevant agreement.”

8.	Regulation 16(1) provides:
“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.”

Submissions
9.	The first submission of Ms Naomi Cunningham, for Mrs Larner, is beguilingly simple.  She submits that regulation 16(1) means exactly what it says: a worker is entitled to payment for 28 days’ annual leave, whether it is taken or not and whether it has been applied for or not.  But that submission, as she accepted in oral argument, is not sufficient to dispose of the employer’s argument.  The entitlement to payment under regulation 16 only arises as a consequence of an entitlement to leave under regulation 13.  If the entitlement to leave has been lost, the entitlement to payment disappears with it. So the issue here is whether the entitlement to leave was lost when the relevant pay year expired on 31 March 2010.

10.	Mr Daniel submits that regulation 15(1) is mandatory, and, unless notice is given as specified in the regulation, no entitlement to leave under regulation 13, and consequently no entitlement to payment under regulation 16, can arise.

11.	Ms Cunningham responds in two ways.  Firstly, regulation 15(1) does not say, “a worker may only take leave to which he is entitled ……. by giving notice to his employer in accordance with paragraph (3).”  It is not necessary to imply the word “only”, and therefore it should not be implied unless it is essential to make the regulation sensible and workable.  But, she submits, it is not essential: quite the contrary.  Although the regulation does not specify that notice and counter‑notice have to be in writing, it does impose mandatory requirements: for example, that the worker’s notice must be given a period in advance of the first day of the leave that is sought equivalent to twice the number of days’ leave to which the notice relates (putting it in less convoluted language, two weeks in advance for one weeks’ leave, four weeks in advance for two weeks’ leave, and so on).  

12.	The requirements of regulation 15(1) to (4) cannot be excluded by an ordinary variation, whether verbal or in writing, as this Appeal Tribunal appear to have thought in paragraph 34 of the judgment in Lyons v Mitie Security Ltd [2010] ICR 628.  The regulation does permit variation or exclusion by a “relevant agreement”, but this is a term defined in regulation 2 as:

“[...] a workforce agreement [...], any provision of a collective agreement which forms part of a contract between [the worker] and his employer, or any other agreement in writing which is legally enforceable as between the worker and his employer [...].”

Discussion
13.	If a worker makes, say, an oral request at work one day to take the following week as holiday, that is not compliant with regulation 15(1), even if the employer agrees to the request. If Mr Daniel’s argument were right, the week’s holiday arranged at short notice could not be annual leave to which the worker was entitled under regulation 13 or in respect of which he would be entitled to be paid under regulation 16.  This would be a curious conclusion.  

14.	I accept Ms Cunningham’s submission on the meaning of regulation 15.  If the worker has given notice in accordance with regulation 15(1), and the employer fails to give a counter‑notice in accordance with regulation 15(2), then the right to take paid annual leave at the specified time crystallises, and the employer cannot by giving late notice or changing his mind deprive the worker of that right.

15.	Both sides referred to the important decision of the European Court of Justice in Pereda v Madrid Movilidad SA [2009] IRLR 959, given some eight months after the Grand Chamber’s decision in Stringer.  Mr Pereda had a period of paid annual leave scheduled for 16 July to 14 August 2007.  On 3 July 2007 he suffered an accident at work and was unable to come to work until 13 August 2007.  Consequently, he was on sick leave for all but two days of his booked annual leave.  He asked his employer for a new period of paid annual leave from 15 November to 15 December 2007, on the ground that he had been on sick leave during a period of annual leave originally scheduled.  The employer refused, and Mr Pereda brought legal proceedings.  The domestic court stayed the proceedings and referred a question to the European Court of Justice, which held as follows:

“Article 7(1) of [the Working Time] Directive [...] [precludes] national provisions or collective agreements which [prevent] a worker who is on sick leave during a period of annual leave [...] [from taking] his annual leave [after his recovery] at a time other than that originally scheduled, if necessary outside the [leave year or carry‑over] period [...].
Article 7(1) [...] does not preclude, as a rule, national legislation which lays down conditions for the exercise of the right to paid annual leave [...], including even the loss of that right at the end of a leave year or of a carry‑over period, provided, however, that the worker [...] has actually had the opportunity to exercise that right.  Thus, the right to paid annual leave is not extinguished at the end of the reference period laid down by national law where the worker was on sick leave for the whole or part of the leave year and has not actually had the opportunity to exercise that right.
[...] [T]he purpose of the entitlement to paid annual leave is to enable the worker to rest and to enjoy a period of relaxation and leisure.
[...] [He is] entitled to actual rest, with a view to ensuring effective protection of his health and safety [;] [...] it is only where the employment relationship is terminated that [...] an allowance [may] be paid in lieu of paid annual leave [...].
The purpose of the entitlement to sick leave is different.  It is given to the worker so that he can recover from being ill.”

16.	Mr Daniel draws a contrast between Mr Pereda’s case and Mrs Larner’s.  Mr Pereda, who was ill during the period of his booked leave, was deprived of the opportunity to exercise the right to a holiday; Mrs Larner was not.  She could have given notice to her employers at any time before the end of the leave year.  

17.	I accept Ms Cunningham’s submission that the result of Stringer and Pereda is that there is no distinction between the two cases.  Mrs Larner was signed off sick for the whole of the pay year 2009‑2010.  She is therefore presumed not to have been well enough to exercise what the Luxembourg court has described as her “right to enjoy a period of relaxation and leisure,” so as a matter of law, contrary to what a layman might have thought, she did not have the opportunity at any time during 2009‑2010 to take her annual leave.  Instead, she had the right to have her leave entitlement under Regulation 13 carried over to the following year; and she had that right, in my view, without having to make a formal request for the leave to be carried over.  The right to be paid for that annual leave crystallised on the termination of her employment; as it happens, only a few days after the end of the pay year.  

18.	The position might be different in the case of a fit employee who fails to make any request for leave during the whole of a pay year.  He or she might then lose the right to take annual leave, certainly if the contract so provides, because that worker, unlike Mrs Larner, has in the words of the Court in Pereda “had the opportunity” to exercise the right to leave.

Conclusion
19.	It follows that, in my judgment, the Tribunal were right to find that Mrs Larner was entitled to be paid for the annual leave which she had no opportunity to take in the year 2009‑2010.  The appeal against that finding is accordingly dismissed.

20.	The Employment Tribunal had before it also a claim for an unspecified number of days (no one seemed to know exactly how many) of paid annual leave which Mrs Larner had not taken for the pay year 2008‑2009 when she went off sick on 5 January 2009.  It will be noted that she was paid in full in accordance with the sick leave provisions of her contract from 5 January 2009 to the end of that pay year.  In those circumstances, Ms Cunningham did not press the claim to any payment in respect of the tail end of that year, and I say no more about it, save that in that respect the claim is to be treated as having been withdrawn.