Use it or loose it for annual leave interpretation of ECJ decision

This is the first reported case of a tribunal applying the European Court of Justice (ECJ) decision made in Pereda (ECJ C-277/08). The ECJ held that holiday could be postponed where an employee was sick, if necessary to the next holiday year.

The issues in this case were very similar to those in Pereda. Shah had booked holiday towards the end of the holiday year, but then was absent due to sickness at the time of his planned leave. He was paid sick pay during his absence and holiday pay during what would have been his holiday period. The holiday year ended before he returned to work and he asked if he could take the holiday leave after his return in the new holiday year. He accepted he would have to account for the holiday pay that had already been paid. His employer refused, relying on Regulation 13(9) of the Working Time Regulations 1998, which sets out a “use it in the year of accrual or lose it” rule in relation to annual leave.

The employment tribunal held that it was bound to follow the ECJ decision, and that it was not possible to construe Regulation 13(9) in accordance with that decision. The normal course of events would be for Shah to bring a High Court claim against the government on the basis that it had not correctly transposed the EU directive into UK law. However, this would not have given Shah an appropriate remedy because he was seeking holiday leave, not financial compensation.

The tribunal held that it was permitted to add words to Regulation 13(9) to ensure compliance with the directive, as this was consistent with the underlying thrust of the legislation. So it inserted words to the effect that the “use it or lose it” policy would not apply where an employee had been unable to take annual leave as a result of sickness absence.

Although only a tribunal decision, the case suggests that employment tribunals are willing to interpret the UK regulations in line with the Pereda decision, even where the regulations clearly contradict what the ECJ ruled in that case. Employers who have been intending to rely on a strict interpretation of the regulations to refuse the carrying over of holiday in this sort of situation may wish to keep an active watch on developments in this area.

Case ref ET 1809311/2009