Employment Legal Update (March 2010) - Employee Rights/ Labour Relations

Originally published 31 March 2010

Keywords: employment update, sick pay, annual leave, employment legislation

Employers have been grappling with difficult issues regarding sick pay and annual leave. There have been a number of recent cases on this at a European and national level. Readers may recall the email alert we sent in October last year, on the European Court of Justice ruling in Pereda v Madrid Movilidad SA. We now report on a recent employment tribunal decision, Shah v First West Yorkshire Ltd, which considered the issues raised in the Pereda case.

Although Shah is only an employment tribunal decision, and therefore not legally binding on other tribunals, it is likely that other tribunals will apply this decision. Going forward, it seems likely that employers will be obliged to allow their employees to carry holiday entitlement into the next holiday year, if the employee has been prevented by ill-health from taking it in the current year.

Facts

Mr Shah broke his ankle and was absent from work for three months. During this period, he had booked 12 days annual leave which he was unable to take due to his injury. He eventually returned to work in the next holiday year.

During his absence, he received contractual sick pay but was also paid holiday pay at a higher rate for those days which he had booked as annual leave. Shortly before his scheduled return, Mr Shah wrote to his employer and asked to reclaim the holiday which he had been unable to take as a result of his sickness. The employer responded by saying that the holiday could not be reclaimed as it related to the previous year's holiday entitlement and as such had been "lost". He submitted a claim to the employment tribunal for loss of holiday under the Working Time Regulations.

The tribunal upheld Mr Shah's claim and made a declaration that the employer had refused to permit Mr Shah to exercise his rights under the WTR by refusing to allow him to take his accrued holiday in the following holiday year, when he had been prevented from taking it in the current leave year because of sickness.

Tribunal Bound to Make Legislation Compatible With European Ruling

In coming to its decision, the tribunal considered itself bound to follow the decision in Pereda. In order to comply with the Working Time Directive, the national law of member states must permit an employee who falls sick during a period of annual leave to take that annual leave subsequently within the current leave year, or, if time does not permit, within the following leave year.

The WTR provide that at least four weeks' of a worker's annual leave entitlement must be taken in the leave year to which it relates (subject to any provision for carry over in a relevant agreement). In this case, the tribunal was required to read additional wording into the WTR, to render it compatible with the ECJ's ruling in Pereda.

Impact

This is the first case in which an employment tribunal has given effect to the ECJ's decision in Pereda. As Mr Shah's position was essentially the same as Mr Pereda's (a fact which was acknowledged by the tribunal) it would have been very surprising if the tribunal had not considered itself bound by the ECJ case. The decision, however, indicates that tribunals are increasingly emboldened to apply principles of EU law, even if they conflict with current UK legislation.

Although the tribunal's decision here is not binding, an amendment to the WTR in a similar form to that contemplated by this tribunal is inevitable. In the meantime, we expect that either tribunals will apply this decision going forward or a similar approach will be endorsed by the Employment Appeal Tribunal (which will then be binding on tribunals), so as to resolve the current incompatibility of the WTR with European law.

Recommendations

Given the impact above, it is recommended that employers consider amending their sick leave procedures (suggestions below). However, one option that is probably no longer available is providing in a holiday procedure that an employee can only take annual leave lost though sickness in the current holiday year.

If an employee is taken ill during a period of annual leave, or if a pre-booked period of leave coincides with a period of illness, and the employee wishes to treat that as sick leave, s/he should be required to follow normal notification procedures on the first day of sickness.
The employee may also be required to produce a medical certificate to verify the illness if s/he wishes to reclassify holiday as sick leave.
An employee who elects to take sick leave in lieu of annual leave could be paid SSP only.
An employee does not have to treat a period of annual leave as sick leave in these circumstances, so the employer can treat the period as annual leave unless the employee requests otherwise.
An employee cannot be paid in lieu of annual leave other than in the year their employment terminates.

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Employment Legislation Timetable

2010

19 JANUARY	DIRECTORS' HEALTH AND SAFETY DUTIES Private members' bill seeking to impose health and safety duties on directors had its first reading in the House of Commons. The bill is set for a second reading on 23 April 2010.
1 FEBRUARY	DECREASE IN MAXIMUM UNFAIR DISMISSAL COMPENSATORY AWARD The maximum award for unfair dismissals with an effective date of termination on or after 1 February 2010 went down to £65,300 due to a drop in RPI.
2 MARCH B	BLACKLISTING OF TRADES UNIONS Provision rendering it unlawful to compile, use, sell or supply "prohibited lists", subject to certain exemptions. There will be new rights for workers not to be subjected to detriment or dismissal for a reason connected to a prohibited list.
MARCH	INCREASE IN MINIMUM PERIOD OF PAID MATERNITY LEAVE The European Commission proposal to amend the Pregnant Workers Directive to increase the minimum period of paid maternity leave to 20 weeks and compulsory maternity leave to 6 weeks will be presented before the European Parliament.
6 APRIL	RIGHT TO REQUEST TIME OFF TO UNDERTAKE TRAINING New right for employees (in organisations with 250 or more employees) to request unpaid time off work to undertake study or training to improve their effectiveness at work and the performance of their employer's business. The procedure will mirror that used for flexible working requests, with employers able to refuse requests for acceptable business reasons.
6 APRIL	WHISTLEBLOWERS The Employment Tribunals (Constitution and Rules of Procedure) (Amendment) Regulations 2010 No. 131 will endow employment tribunals with the power to send details of whistleblowing claims direct to a prescribed regulator where the claimant has given express consent in its ET1 form.
6 APRIL	PATERNITY LEAVE Additional paternity leave of up to 26 weeks will be available, some of which will be transferable from the mother to the father, for parents of babies born (and adoptive parents notified of a match) on or after 3 April 2011. The purpose of the leave will be to care for the child after the mother or adopter has returned to work.
6 APRIL	NEW GP MEDICAL CERTIFICATES: "FIT NOTES" The new "fit note" to be used by GPs is intended to focus minds on what can be done to assist a return to work and prompt useful discussions between GP and employer and employee to further this aim. The GP will be required to complete a tick-box section to confirm whether they consider a phased return to work, altered hours, amended duties and/or workplace adaptations would enable the employee to return to work.
OCTOBER	EQUALITY BILL The Equality Bill is expected to receive Royal Assent this Spring and come into force in October 2010. The Bill will replace existing discrimination legislation with one single act in order to harmonise and strengthen the existing law. The measures introduced by the Bill will include: Extend the concept of positive action to allow employers to recruit or promote someone from an under-represented group but only where they have a choice between two or more equally suitable candidates. Remove the requirement for a comparator in victimisation cases. Introduce hypothetical comparators for gender pay discrimination claims. Make employers explicitly liable, in some cases, for harassment by third parties in the workplace.

2011

1 OCTOBER

AGENCY WORKERS DIRECTIVE
After 12 weeks in the same role, agency workers will be entitled to basic working and employment conditions that are no less favourable than those of employees recruited directly by the hirer.

From the start of an assignment, agency workers will be entitled to equal access to on-site facilities and information on permanent employment vacancies.

2012

1 OCTOBER

PENSIONS
Implementation of the Pensions Act 2008. Employers will be required to automatically enrol " jobholders" into a pension scheme (either the company's own qualifying scheme or a personal accounts scheme) and make minimum contributions, though jobholders will be free to opt out of the scheme once they have been enrolled. The stakeholder pension requirements will be abolished.

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European Union: Employment Legal Update (March 2010)