Case - Her Majesty’s Revenue & Customs v. Stringer, Ainsworth and Others

[2009] UKHL 31, House of Lords - Michael Ford QC
The House of Lords has today (Wednesday 10th June 2009) decided in favour of the workers in the long-running litigation in Stringer (sometimes referred to as Ainsworth), overturning the Court of Appeal.
 
This decision brings to an end this long-running case which started in January 2003. The issues for determination by the House of Lords were:
 
  • whether a worker on long-term sick leave was entitled to take paid annual leave under regulation 13 of the Working Time Regulations 1998;
  • whether a worker who was off sick for all or part of the leave year prior to termination of employment was entitled to a payment of compensation under regulation 14 of the Working Time Regulations; and
  • whether a claim for holiday pay under the Working Time Regulations could also be brought under the unauthorised deduction from wages provisions of the Employment Rights Act 1996.
 
The House of Lords referred the first two issues to the European Court of Justice who gave their judgment on 20 January 2009. The ECJ decided that a member state (i) could allow a worker off sick to take annual leave; or (ii) could prevent a worker taking leave while off sick but – and this is the critical point - only if the worker has the right to carry over annual leave to subsequent leave years if he or she was unable to take leave because of illness. It also held that compensation payments on termination should not be discounted on account of sickness.
 
Before the House of Lords the Revenue accepted two consequences flowed from the ECJ decision. The first is that a worker’s entitlement to compensation on termination of employment under regulation 14 of the Working Time Regulations was unaffected by sickness absence. The three claimants who were off sick for the whole leave year prior to termination of employment were therefore entitled to full compensation payments under regulation 14. The second consequence concerns workers who are on long-term sickness absence and who apply to take annual leave. Because there is no right to carry over under the Working Time Regulations, the Revenue accepted that such workers are entitled to paid annual leave. Hence it accepted that Mrs Khan, who had applied to take annual leave while off sick, was entitled to payment of her normal wages for that period of leave. The result is that sick workers cannot be refused paid annual leave if they wish to take it, and nor can employers reduce termination payments on account of sickness (The case has not decided, however, what is the position of a worker who is unable to take leave because of sickness.)
 
As a result of the acceptance by the Revenue of the effect of the ECJ judgment, the House of Lords only heard substantial argument on the third issue, relating to deduction from wages, at a hearing on 30 April 2009. Their Lordships have now unanimously held that a claim for (i) unpaid holiday under regulations 13 and 16 of the Working Time Regulations or (ii) a payment on termination under regulation 14 can be pursued as unauthorised deduction claims as well as under the Working Time Regulations. The important practical effect is that a worker can take advantage of the more generous time limits which apply to unlawful deduction claims. A claim under the Working Time Regulations must be brought within three months of each failure to pay the holiday pay or termination payment. By contrast, a claim for unlawful deduction from wages can be brought within three months of the last in a series of deductions, so allowing a claim to go back more than three months if the underpayments form part of a series.
 
The successful employees concerned in the case were all members of PCS. PCS has given them legal assistance throughout this long-running case. PCS instructed Thompsons to act on behalf of their members. Chris Jeans Q.C. and Michael Ford were instructed in both the ECJ and House of Lords.
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