Lost and found

A recent employment tribunal decision confirms that the position concerning entitlement to lost holiday pay from an earlier leave year may be clearer where a termination of employment has taken place, says Ed Beever.

Recent European case law has re-ignited the debate about claiming holiday pay in circumstances where it has been lost, or alternatively where an employee has arguably been prevented from taking it, due to sickness. In the public sector, there remains uncertainty about how the Working Time Regulations (WTR) interact with the European Working Time Directive.

In the light of the Court of Appeal decision in Gibson, it might currently be assumed that any direct effect arguments will face difficulties. Readers should note however that the issue is currently before the Supreme Court in British Airways plc v Williams. Alternatively, employees might possibly fall back on arguments that Regulation 13(9) of WTR could be read pursuant to what might be regarded as Mangold principles deriving from the ECJ decision in that case.

Similarly, it may be possible to argue that Regulation 13(9) of WTR may be read purposively so as to give effect to the impact of the Directive in order to correct the legislature’s failure properly to implement it even in the absence of direct effect. This appears to have been the approach taken by the Employment Tribunal in Shah v First West Yorkshire Ltd (Lexology, 3 March 2010) adopting the ECJ decision in Pereda.

But what is the position if termination of employment has taken place?

Facts

The Cardiff Employment Tribunal heard the case of Southard v Abertawe Bro Morgannwg University NHS Trust in January 2010. Mrs Southard had been absent through sickness for 13 months up to the termination of her employment in August 2009. This period covered two consecutive leave years. Mrs Southard had unused holiday from the first year and did not request to take it. Further, the tribunal found as a fact that she was not prevented from taking it. On termination, Mrs Southard was paid her holiday entitlement relating to her year of departure. At issue was her previous leave year’s holiday entitlement.

The ET Decision

First, the tribunal identified the relevant law. The House of Lords case of HMRC v Stringer did not expressly deal with the point at issue but the tribunal recognised that the practical effect of the House of Lords’ judgment was to rehabilitate the reasoning of the Employment Appeal Tribunal in the two previous cases of Canada Life v Gray and List Design v Douglas. The headline point was, according to the tribunal, that it is not necessary for workers actually to take their annual leave (or even to seek to take it) in order to be able to claim under Regulation 16.

In so doing, the tribunal rejected the submission that Mrs Southard’s failure to request leave under Regulation 15 was a bar to her claim. Regulation 15 is concerned with the mechanism for taking or requesting leave and not a precondition of entitlement to compensation for untaken leave once employment has terminated.

Conclusion

When termination of employment arises, recovery of lost holiday pay can be stated very simply by reference to Canada Life and List Design case law. Where there is an outstanding entitlement to holiday pay from a previous leave year, an employee may be entitled to compensation for that untaken entitlement once her employment has terminated. The decision of the House of Lords in Stringer has paved the way for such a claim by permitting a claim for compensation under Part II of the Employment Rights Act 1996.

Ed Beever is a barrister at St Philips in Birmingham. He can be contacted via This email address is being protected from spambots. You need JavaScript enabled to view it..