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Employment law update: Statutory holiday pay entitlement for workers

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Statutory holiday pay entitlement for workers following the decision in Fraser v South West London St George’s Mental Health Trust

Workers are only entitled to statutory holiday pay if they take statutory holiday or give notice to their employer that they wish to take such holiday (Fraser v South West London St George’s Mental Health Trust).

This changes the previous position, where workers could receive payments on termination in respect of previous years’ relinquished statutory holiday entitlement without giving notice to their employer that they wish to take such holiday (Canada Life v Gray).

Workers on long-term sick leave do not necessarily lose their untaken statutory holiday entitlement at the end of each year.

Workers have a choice; to take statutory holiday while off sick, or to ask for the holiday to be deferred until their return to work.

The decision in Fraser is important for the employer as it means holiday pay on termination will not be paid to an employee unless the worker takes the leave to which the holiday pay relates and does so by giving notice. It is good news for employers as it puts a positive obligation on an employee to give notice in respect of holiday pay entitlement.

Current Position

Workers continue to accrue annual leave entitlement during sickness absence and workers can choose to take annual leave as part of their absence.

The Decision In Fraser

Mrs Fraser was injured at work and went on long-term sick leave in November 2005 for four years until her dismissal in October 2008. For the last two years of her employment she received no pay. On the termination of her employment, Mrs Fraser was paid her in lieu of her final year’s statutory holiday entitlement, as required under regulation 14 of the Working Time Regulations 1998 (WTR 1998).

However Mrs Fraser’s employer (the Trust) did not make a payment in lieu of her untaken holiday entitlement for the previous two leave years. Mrs Fraser sought 4 weeks holiday pay in respect of the previous two years.

On appeal, the Employment Appeal Tribunal (EAT) rejected Mrs Fraser’s claim and held that: 

  1. An employee is only entitled to holiday pay under Regulation 16(1) of the WTR 1998 if they have actually taken the leave to which the pay relates and have done so in accordance with the WTR 1998 by giving notice pursuant to Regulation 15;
  2. The authorities of List Design Group Ltd v Catley [2002] ICR 686 and Canada Life Ltd v Gray [2004] ICR 673 were wrongly decided and Kigass Aero Components Ltd v Brown [2002] ICR 697 was correct. In Kigass the EAT stated, obiter, that workers have no right to holiday pay under regulation 16 of the WTR 1998 where they have not taken holiday, unless ‘some clear and comprehensive pre-emptive indication of a refusal by the employer to permit the leave has been given.’
  3. Fundamentally, the policy of the WTR 1998 is that workers should take annual holiday in the interests of their health and welfare. If workers were not entitled to be paid while taking statutory holiday, then they should be discouraged from exercising their entitlement.

Conclusion

 

To contact Sarah Tahamtani, partner in our employment team, please call 0113 336 3314.