The decision of the European Court of Justice (ECJ) in the long-running case of Stringer v HM Revenue and Customs (HMRC) has significant implications for employers with employees on long-term sick leave and it is likely that changes to the Working Time Regulations 1998 (WTR), which implement the European Working Time Directive in the UK, will be necessary.

The case dealt with the issue of whether or not HMRC employees were entitled to accrue holiday pay during a period of long-term sick leave.

In April 2005, the Court of Appeal held, in a unanimous decision, that the right to four weeks’ statutory paid holiday under the WTR does not continue to accrue whilst an employee is absent on long-term sick leave. The decision only referred to employees who are absent for an entire holiday year and was based on the argument that leave cannot be taken by someone who is not at work. In addition, the holiday entitlement under the Regulations is designed to ensure that minimum health and safety standards apply to working time. If an employee is not at work, he or she cannot derive any health benefit from taking leave.

In December 2006, the House of Lords remitted certain questions regarding the interpretation of the Working Time Directive to the ECJ, which has now handed down its judgment.

The ECJ ruled that employees who have been on sick leave for a long period should be allowed to take accrued holiday on their return to work or be paid in lieu at their normal rate of pay if the employment relationship ends without them returning to work. The national courts can decide whether the paid leave can be taken during a period of sickness or whether it should be carried over to another year, but the right to take the leave is not extinguished.

The House of Lords will now consider the case in the light of this ruling.

In the UK, the WTR state that workers must take a minimum of four weeks’ holiday in each leave year and, from 1 April 2009, payment in lieu of untaken minimum leave is not permitted except on termination.