Written by Richard Rowell
Published on September 1, 2009

As was expected, the House of Lords  found in favour of the claimants in the HMRC v Stringer and ors case following the lead of the European Court of Justice (ECJ).  There are two important strands to this decision that began its life back in 2004 as Ainsworth, Kilic, Stringer, Thwaites and Khan v Commissioners of Inland Revenue (in the intervening 5 years even the government department has changed its name!):

  • Is unpaid holiday pay an unlawful deduction from wages?  Yes, said the law lords
  • Does holiday pay accrue during periods of sickness?  Yes, the House of Lords overturned the decision of the Court of Appeal in April 2005

The importance of the first point is that it allows claims to be made under the Employment Rights Act (ERA) 1996 as well as the 1998 Working Time Regulations. Section 23 of the ERA permits an employee to make a claim in respect of a series of unlawful deductions as long as the claim is presented within three months of the last in the series of alleged offences. There is no limit to how far back the claims may go if they are linked. Until now claims had to be made under regulation 14 of the Working Time Regulations (WTR) 1998 as holiday pay was not classed as 'wages' so not covered by ERA, with a separate claim having to be made for each underpayment within three months of the alleged offence, as no linking of offences is permitted under the WTR. This placed a huge burden on the tribunal system and the claimant. So whilst Mr Ainsworth (a former Tax Inspector from Chester) was only claiming for a small underpayment of £16.14 in his November 2002 salary relating to only four days of the leave year, the implications of the judgment are far reaching - shades of the Alabaster case here which also centred on a small monetary amount.

Employers will now be required to pay salary in lieu of holiday on the termination of an employee who has been off sick for the whole holiday year and who has therefore been unable to take the holiday within the leave year that will have accrued during their absence, but the question is how much salary in lieu?  Disappointingly the judgment did not clarify whether the entitlement to accrue holidays, and therefore be paid for them on termination, extends for more than one year if that is how long the employee has been off sick.  If this were the case it would mean that a worker who has been off sick is entitled to more than a worker who has not, unless the WTR are amended to allow for more than one years carry forward of leave.

Full details of the case can be found here http://www.publications.parliament.uk/pa/ld200809/ldjudgmt/jd090610/string-1.htm