UK: Statutory holiday - employees unable to take holiday due to sick leave can carry it over into a new year without express request

Where an employee is unable or unwilling to take their EU-derived entitlement to 4 weeks' statutory holiday in the current holiday year due to being on sick leave, an employer must allow the employee to carry over this leave into a new holiday year even if the employee has not expressly requested this.

Upholding the EAT ruling in Larner, the Court of Appeal decided that an employee who had been on sick leave for the whole holiday year and until her dismissal in the following year was entitled to carry over the earlier year's entitlement and receive pay in lieu on termination. 

There is no right to carry over in the express provisions of the Working Time Regulations.  However, public sector workers can rely directly on EU law to this effect.  The Court of Appeal ruled that private sector workers have the same rights because the necessary words can be read into the UK regulations. (NHS Leeds v Larner, CA)

This decision resolves the conflict with the EAT ruling in Fraser v South West London St George’s Mental Health Trust, which suggested that employees had to expressly request carry over, but there are still unanswered questions:

• Is the employee entitled to pay in lieu of holiday carried over from a previous year due to sick leave where the employee has returned to work prior to dismissal in the second year and therefore had an opportunity to take the holiday?  This was the situation in Fraser, and was the basis on which the Court of Appeal distinguished that case from Larner.  It is unclear whether the Court considered that Fraser was wrongly decided on its facts, but the wording which the Court suggested could be read into the UK regulations would not exclude the right to payment in lieu in this situation.
• Can employers impose a cut off by which carried over holiday must be used (assuming the employee is not on sick leave)?  ECJ case law suggests that this may be possible provided the period is substantial (over 12 months).  The Government is due to announce amendments to the UK regulations to deal with carryover; hopefully the cut off issue will be addressed.
• Is the additional 1.6 days' statutory holiday provided under UK law to be treated in the same way as the 4 week entitlement? Again ECJ caselaw suggests that different rules can apply.  The Government's original proposal was to limit carryover rights to the 4 week entitlement.