Under European law, the ECJ has ruled that workers are only entitled to carry forward 4 weeks accrued annual leave where they have been absent due to sickness
Workers are entitled to a minimum of 4 weeks' paid annual leave under European law. Our own Working Time Regulations 1998 (the Regulations) are more generous and provide that workers are entitled to a minimum of 5.6 weeks paid holiday in each leave year. Many employers also provide more generous contractual holiday.
Decisions from the European Court of Justice (the ECJ) over the last few years have changed the legal landscape regarding holiday entitlement and sickness absence. It is now settled law that a worker on sick leave continues to accrue holiday entitlement while off sick. Following Pereda v Madrid Movilida SA  IRLR 959 it is also clear that a worker is entitled to carry over any accrued but untaken holiday to the next leave year if they have been prevented from taking it due to sickness absence.
However, questions remain over whether the entitlement to carry holiday forward to subsequent leave years is limited in time in any way and whether it covers just a worker's minimum entitlement under European law or extends to any additional holidays granted by national law?
In the recent case of Neidel v Stadt Frankfurt am Main C-377/10 the ECJ decided that the entitlement to carry holiday forward only relates to the minimum 4 weeks' paid leave provided by the European Working Time Directive (the Directive).
Mr Neidel was a fire fighter in Germany who, after a long period of sickness absence, retired in August 2009.
After Mr Neidel's employment terminated he did not receive a payment in lieu of 86 days' holiday entitlement that he had been prevented from taking during 2007, 2008 and 2009.
German law made no provision for a payment in lieu of untaken holiday on termination and limited a sick worker's carry over of untaken holiday entitlement to a period of nine months after the end of the year in which they accrued that holiday.
Mr Neidel claimed for all his accrued but untaken holiday and the German courts referred a number of questions to the ECJ.
The ECJ decided that the Directive entitled a worker to a payment in lieu of any holiday they had accrued but not taken because of sickness on termination of their employment.
However, this requirement only related to the minimum 4 weeks' leave provided by the Directive. It was up to the member states to decide whether to extend the entitlement to a payment in lieu of accrued but untaken holiday in excess of 4 weeks where the worker has been unable to take it because of sickness.
The ECJ also decided that the Directive precluded a national law that limited the carry over of any holiday entitlement to a period of nine months after the expiry of the reference period within which the holiday had accrued.
In making its decision the ECJ referred to the case of KHS AG v Schulte  IRLR 156 in which it held that a worker absent on sick leave must be entitled to carry over untaken annual leave provided for by the Directive for a period substantially longer than the reference period in respect of which it has accrued.
In Schulte the ECJ decided that a German law providing for a 15 month carry over period was compatible with the Directive as it considered this was substantially longer than the 12 month reference period in which the annual leave accrued.
In Neidel the nine month carry-over period provided under German law was shorter than the reference period of one year and was therefore precluded by the Directive.
In May 2011, the Government published a consultation paper, Modern Workplaces, in which it proposed to provide workers with the entitlement to carry over any holiday they accrue but are prevented from taking due to sickness absence. In its proposal, the Government limited the entitlement to do so to the 4 week annual leave period provided by the Directive, not the full 5.6 weeks provided by the Regulations.
The recent decisions by the ECJ suggest that the Government's proposals are likely to be compatible with the Directive and this will be welcomed by employers. The Government's response to the consultation is expected any day now. Following this employers may wish to review and amend their holiday terms and policies.
After the comments in Schulte, it is unfortunate that the decision in Neidel has not provided any further clarity on the appropriate carry over period. It is clear however that any period must be greater than 12 months and anything below 15 months is likely to be unenforceable.