Schultz-Hoff v Deutsche Rentenversicherung Bund; Stringer and others v Her Majesty's Revenue and Customs Cases C-350/06 and C-520/06 ECJ

long-term sick leave | annual leave | holiday pay

The European Court of Justice (ECJ) has held that the right to paid annual leave continues to accrue during sick leave and, on termination of the employment relationship, a worker who has been on sick leave and unable to take paid annual leave is entitled to a payment in lieu.

The case of Stringer and others v Her Majesty’s Revenue and Customs concerned two categories of worker. One individual was on indefinite sick leave and asked to take a number of days' paid annual leave. The others were dismissed while they were on long-term sick leave. Since they had not taken their paid annual leave during the relevant leave year, they claimed payment in lieu.

The claimants were successful before the employment tribunal and the EAT in their argument that they were entitled to paid annual leave under the Working Time Regulations 1998 (SI 1998/1833), which implement the Working Time Directive (2003/88/EC), but the Court of Appeal allowed an appeal. The employees appealed to the House of Lords, which dealt with the case together with the German case Schultz-Hoff v Deutsche Rentenversicherung Bund. Schultz-Hoff was concerned with whether or not national legislation can provide that the right to paid annual leave is extinguished if, because of incapacity, the leave is not taken in the relevant leave year or by the end of a stipulated carry-over period. Under German law, there is a carry-over period of three months.

The ECJ said that it is up to member states to lay down conditions for the exercise and implementation of the right to paid annual leave, by prescribing the specific circumstances in which workers may exercise the right. They cannot, however, make the existence of the right itself subject to any preconditions. It therefore follows that art.7(1) of the Directive does not preclude national legislation prohibiting workers on sickness absence from taking paid annual leave during their sickness absence, provided that they can exercise their right under the Directive during another period. (Neither does the Directive preclude national legislation allowing workers on sickness absence to take paid annual leave during this absence.)

The ECJ went on to say that, although the issue of carrying over untaken leave is governed by national legislation, this principle is subject to certain limits. It said that there is no distinction in the Directive between workers absent on sick leave and those who have worked during the course of the year, so the right to paid annual leave cannot be made subject to a condition that the worker has actually worked during the leave year. Consequently, member states can provide for the loss of the right to paid annual leave at the end of a leave year, or at the end of a carry-over period, only if the worker concerned has actually had the opportunity to exercise the right to take the leave conferred by the Directive. A worker on sick leave for the whole leave year and beyond any carry-over period is denied the opportunity to exercise the right to paid annual leave. It follows that the same is true of a worker who has worked for part of the year before going on sick leave.

The ECJ concluded that, where a worker's employment ends and he or she has been on sick leave for the whole or part of the leave year and any carry-over period and, as a result, has not been able to exercise the right to paid annual leave, the worker is entitled to payment in lieu of the leave. Although the ECJ did not explicitly state this, it would seem to follow that workers returning from a period of sickness absence in a new leave year would be entitled to take the holiday accrued during their sickness absence.

The case now returns to the House of Lords for it to apply the ECJ's ruling to UK law.

Case transcript of Schultz-Hoff v Deutsche Rentenversicherung Bund; Stringer and others v Her Majesty’s Revenue and Customs (on the ECJ website)

Go to HR & Compliance Centre case law stop press.