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Sue Ashtiany

Partner, Nabarro Nathanson

Update: employment

Update: employment


Sue Ashtiany considers holiday pay, the new 'fit note' scheme, the effect on employers of the government's new measures to deal with the flu epidemic, and disability discrimination

In June this year we received the decision of the House of Lords in Stringer v HMRC [2009] UKHL 31 (Solicitors Journal 153/23, 16 June 2009). This is the end of this particular saga and the consensus is that we are left in confusion. Unfortunately, by the time the case came to the House of Lords, the main difficult issue from the decision of the European Court of Justice was no longer a live issue.

In sickness and in holiday

These cases have been running since 2002 and they concern various employees of HM Revenue & Customs who had been on long-term sickness. In one case the individual had left employment part way through a leave year during which he had not worked at all. In another case, an employee was refused permission to take paid holiday while on long-term sick leave as she was already away and unable to work.

Prior to the European Court of Justice, the UK courts had held that employees could not take holiday while on sick leave and therefore were also not entitled to payment in lieu of untaken holiday when their employment ended. The UK regulations (Working Time Regulations 1998 SI 1833 'WTR') provide (Regulation 13) that employees are entitled to statutory paid holidays annually but that they must take them during the leave year (or any agreed extension of it) or lose them. Hitherto employers have therefore been reasonably clear that if employees have not taken leave during a past leave year then their right to that leave has extinguished.

In January this year, the ECJ's decision effectively drove a coach and horses through this provision in the regulations. The ECJ held that it is for member states to determine whether a worker is entitled to take paid statutory holiday while on sick leave. That is uncontroversial. The ECJ went on to hold, however, that where the employee is unable to take the paid holiday during the leave year because of extended sick leave then the right is not extinguished at the end of a leave year. So, where the worker has been absent for the whole or part of a leave year on sick leave, and thus been prevented from taking their full statutory holiday entitlement, they should be entitled to carry it over or be paid in lieu on termination.

This decision creates considerable difficulties for interpretation of the WTR as it appears to nullify the provision limiting the right to the leave year in question. It also leaves a number of unanswered questions about the specific circumstances in which the right will continue. Does it depend on the employee trying to take leave and being refused? Does the employer have to volunteer a period of paid annual leave for people on sick leave in order to ensure they do not carry over? What about staff on very long-term disability, or permanent health insurance? Under the WTR, a claim for leave in lieu of untaken leave has to be brought within three months of the event. However, under the Employment Rights Act 1996, the employee could potentially have a claim for a series of deductions and bring it within three months of the last of those.

Unfortunately, by the time the case came back to the House of Lords, the only live issue was whether claims for holiday pay could be brought as claims for unlawful deductions from wages, and therefore benefit from the wider provision under the Employment Rights Act 1996, or whether the claim had to be brought under the Working Time Regulations. The difference is significant especially where the claimant is away for long periods of time over several leave years. The House of Lords decided that claimants could benefit from the ERA provisions, so employers could be faced with claims for several years' worth of unpaid annual leave. As this is a Community right, the principle of equivalence would suggest that such claims could be back-dated for up to six years. Unfortunately, the House of Lords did not address the impact of the ECJ decision on the WTR '“ so a lot of questions are left unanswered.

Practical implications

Employers are advised to be more pro-active about the management of sick leave, especially long-term sick leave. They need to ensure that, wherever possible, a proportion of the sick leave is translated into annual leave, possibly by use of a Regulation 15 notice, so as to try and make sure that annual leave is taken in each leave year. Some employers may decide to pay all staff for untaken leave at the end of each leave year, thus extinguishing any carry over. Employers may need to consider changing contracts of employment so as to insert provisions to give them greater flexibility under Regulation 15(5). There are particular implications where there are staff on permanent disability insurance who have been out of the workplace for potentially many years.

Conversely, those advising employees should bear in mind that an employee who requests the right to take a paid holiday, even when incapacitated from work, banks that right apparently even beyond the leave year in question. Also, an employee who is on sick leave but has run out of sick pay can convert a period of sick leave potentially into annual leave and thus perhaps trigger a further period of sick leave entitlement. However, the employer may be able to refuse and extinguish the right by making an end-year payment. Unfortunately, all these issues will have to await more cases; at some point soon there will be a head-on challenge to the clear words of Regulation 15 as against the interpretation of the directive by the Court of Justice. The two cannot stand together.

Fit notes

Staying with the theme of workplace sickness, the government is consulting about proposed changes to the current medical statements; the one employment lawyers see the most of is the Med 3, the GP sick note. The consultation comes after the recommendations of Dame Carol Black, national director for health and work, in her paper 'Working for a healthier tomorrow: review of the health of Britain's working age population' (2008). Dr Black's recommendations were that the current sick note should be replaced with a fit note and that GP's, who are the primary source of advice and guidance for individuals, should be provided with better support in giving 'back to work' advice to their patients.

The main purpose of the new draft regulations is to enable doctors to record information in order to 'assist with discussions between individuals and their employers' about changes to the employee's work environment or job role which would help in achieving an early return to work. Doctors will be able to indicate where someone 'may be fit for some work now'. In addition, a menu of suggestions is proposed to allow or require doctors to indicate where patients might benefit from changes such as a phased return to work, altered hours, amended duties and workplace adaptations.

There is also proposed to be a simplification of forms. Thus the current Med 5 form, which is also sometimes called the backdating certificate, will be merged into the new fitness form and the current Med 4 form which was required under the incapacity benefit regime will probably be no longer required. The consultation ends on 19 August. The underlying premise is that it is better for people to be at work and that the current situation where GPs act as their patients' advocate and simply provide a Med 3 in the majority of cases certifying them as unfit for work is far too clunky.

In reality, the real questions remain. What is the status of a GP 'recommendation'? What about complex situations where there are disputes between the employer and the employee about the job scope or duties? Is it for the GP to try and establish what is medical and what may by psycho-social? It is difficult to see how a hard pressed GP with only eight minutes per patient can in reality do anything other than reflect the wishes of the patient as to whether or not they want to return to work at that time and on what conditions. One proposed addition to the checklist is a suggested referral to occupational health and my guess is that any sensible GP who has doubts about how fit the patient is for work will just tick that box and leave it to someone else to decide.


The government is introducing a number of measures to prepare us for an epidemic of this flu. In addition to online and telephone dispensing of drugs, they are also proposing to extend the period of self-certification to 14 days. This means that for SSP purposes an employer will be required to accept the employee's self-reporting in respect of the first 14 days rather than seven as at present. However, employers will be able to impose greater notification requirements of their staff by way of contract or policy and may be faced with some tricky issues if they have reason to doubt the validity of the self-certification process. It looks as though the occupational health department is going to be kept busy.

Disability discrimination

Cases are coming thick and fast this year before the summer break. In Carter v London Underground EAT (Underhill J, T Motture, B Switzer) 8 May 2009, the employer dismissed an employee who had long-term mental health problems and had been off sick for about two years. The EAT with the president presiding confirmed that the House of Lords decision in Malcolm v Lewisham LBC (2008) UKHL 43 provides the correct test for employment cases as well. The employer had not discriminated against Mr Carter because it would also have sacked someone else with the same absence record whether or not it was disability-related.

Fareham College v Walters EAT/0396/08, 0076/09, however, is authority for the proposition that a reasonable adjustments case is more akin to a claim of indirect discrimination such that there is a requirement for a more general comparative exercise required in a reasonable adjustments claim, involving a class or group of non-disabled comparators, rather than the like for like comparison required in cases of direct sex or race discrimination or in disability related discrimination claims. It was not therefore necessary for the claimant to satisfy the tribunal that someone who did not have a disability but whose circumstances were otherwise the same as hers would have been treated differently. What was relevant was the impact of the provision, criterion or practice identified by the tribunal, namely the respondent's refusal to permit this claimant to have a phased return to work, on non-disabled staff.

There are cases where the employer is exempt from the duty to make adjustments. These are where the employer did not and could not reasonably have known that the employee (or candidate) was disabled and did not or could not reasonably have known that the employee (or candidate) would be at a substantial disadvantage because of their disability (see Eastern and Coastal Kent PCT v Grey).

Finally, in Chief Constable of Dumfries and Galloway v Adams EAT (SC) 3/4/2009, the EAT upheld the tribunal's decision that the claimant was disabled even though the disability, which consisted of problems after a night shift, only occurred in the context of the work requirements. The EAT commented that while the tribunals were not supposed to review highly specialised work activities, they could legitimately take account of an adverse effect that is attributable to a work activity that is normal in the sense that it is to be found in a range of different work situations. To put it another way, something that a person does only at work may be classed as 'normal' if it is common to different types of employment.

Readers will be aware that the Equality Bill is going through its parliamentary passage and is set to make significant further changes to the disability discrimination law, including a statutory repeal of Malcolm.