A barristers analysis of holiday pay and furlough



By Adam Willoughby

Barrister, Head of Sports Law & Deputy Head of Employment Law at Broadway House Chambers

With the prospect of several bank holidays on the horizon with little indication as to how long circumstances may require continued periods of furlough under the Coronavirus Job Retention Scheme (‘the Scheme’), many employers will be worried as to how they deal with the interaction between furlough and annual leave. Specifically, whether they can require annual leave to be taken during furlough and how they deal with bank holidays where they are included within employee’s annual leave entitlement under their contracts of employment.

It is by no means a clear picture.

Below I offer my opinion: It is not to be taken as legal advice.

The starting position assumes, in case it is in any doubt, that annual leave continues to accrue during any period of furlough.

There is now The Working Time (Coronavirus) (Amendment) Regulations 2020 (‘the 2020 Regulations’) which allow the carry over of accrued but untaken annual leave where “it was not reasonably practicable for a worker to take some or all of the leave to which [they] are entitled under this regulation as a result of the effects of coronavirus”. The 2020 Regulations apply to the leave granted under regulation 13 of the Working Time Regulations 1996, not regulation 13A leave.

The question which arises is whether employers can require employees take annual leave during a period of furlough. In my view, this question can be answered in the negative, although an employee can decide to take their leave if they so wish.

The entire rationale of Article 7 of the Working Time Directive is for employees to take time away from work in order to rest and relax. In my view, one has to only look as far as the principles established in cases such as Stringer for support of that proposition. In Stringer, annual leave could be carried over in circumstances where an employee was on sick leave. The rationale was that sick leave was taken in order to recover from that sickness causing the absence rather than to enjoy a period of leisure away from work. Following Stringer, if an employee wanted to take annual leave during sickness absence, he or she could; however, an employer could not mandate such leave be taken. The same principle underpins maternity leave (see Merino-Gomez). On the other hand, in Dicu the relationship between parental leave and annual leave was considered. In that case, European Court of Justice held that during a period of parental leave annual leave could be taken. This was principally because the leave was foreseeable (when compared to sick leave) and entirely in the worker’s control: The key aims underpinning Article 7 could thus be achieved.

Where does that leave us in this unprecedented time of 9 million employees being furloughed? Furlough is, in my view, comparable to sick leave. Employees are confined to their homes with severely impaired ability to engage in leisure activities or even leave their homes. It is, in some senses, worse than being confined to ones home with sickness. The effect upon many employees is devastating as they worry about their health, their finances and undergo significant pressure caused by the need to stay at home. Employees were not able to plan for this time in lockdown and this unprecedented time was not foreseen. The effect, in my view, is that employees cannot (with an exception detailed below) require employees to take Regulation 13 leave during furlough.

Whilst employers could, under the Working Time Regulations 1996, give notice to employees to take leave during furlough, such an act would be subject to scrutiny. Requiring an employee to take annual leave must be reasonable. Arguably, in the circumstances in which we find ourselves, requiring annual leave to be taken during furlough would be unreasonable given the government imposed constraints set out above.

Some commentators have cited the case of Russell in support of the proposition that an employer can require an employee to take annual leave during furlough. In that case, oil rig workers argued that requiring them to take annual leave during time onshore was in violation of their rights; they argued that annual leave could only be taken during the time they were required to be on the oil rig. That argument was rejected; however, in my view this case does not provide support for the proposition that an employer can require an employee to take annual leave during furlough. The oil rig workers were able to fulfil the purpose set out in Stringer during the time they were onshore. The circumstances between oil rig workers onshore and employees on furlough during the coronavirus pandemic are very different.

The position set out above is supported by the fact that the government introduced the 2020 Regulations allowing the carry over of Regulation 13 annual leave. The legislators must have had in mind the very arguments set out above as to the ability of employees to take annual leave during furlough.

There is an exception to the above: Bank Holidays. Most contracts of employment designate bank holidays as part of the annual leave entitlement.

The ACAS Guidance says: “Employees and workers may still be required to use a day’s paid holiday for bank holidays, including when they’re furloughed”.

In my view, requiring an employee to take bank holidays as annual leave would not fall foul of the arguments I have set out above. Such leave, designated under the contract of employment, was intended to be taken on the falling of bank holidays throughout the year and thus agreed prior to the coronavirus pandemic hitting.

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