Appeal judges have spelled out the law on when a worker is entitled to payment in lieu of annual leave not taken because of long-term absence from their job through sickness.

They rejected a challenge by NHS Leeds arising out of an employment tribunal decision that a clerical officer, Janet Larner - who was dismissed after a prolonged period of sickness - was entitled to payment in lieu of the annual paid leave she had not taken or requested to be carried forward to the following year.

Lord Justice Mummery, sitting at the Court of Appeal in London with Lord Justice Tomlinson and Mr Justice Henderson, ruled that there was no error of law in the judgment made by the employment tribunal in the woman’s favour.

He said: “Entitlement to paid annual leave and to payment in lieu on termination of employment matter a great deal to employers and workers alike.

“Both sides need to know where they stand, preferably without having to go to the Court of Appeal, or all the way to Luxembourg, to find out how the law works.

“The rule of law, in its practical application in the workplace, should ensure that, as far as possible, the legal rules are certain, clear and accessible by the people for whom the rules were made.”

The judge said the court had been informed that not all Employment Tribunals “have been taking the same approach to paid annual leave rights on termination of employment after an extended period of absence on sick leave”.

It was hoped that the ruling in the case involving the appeal by NHS Leeds over the decision made in the case of former employee Mrs Janet Larner “will produce more consistency”.

Lord Justice Mummery said: “On this appeal, the specific point is whether the Employment Tribunal (ET) erred in law in holding that the claimant Mrs Janet Larner, whose employment was terminated by NHS Leeds after her prolonged period of sickness absence throughout and beyond the whole of the preceding year, was entitled to be paid in lieu of the annual leave which she had neither taken in that leave year nor requested to carry forward to the following leave year, in which she was dismissed.”

He said the key facts could not be simpler: “The appellant NHS Leeds employed the claimant.

“She was absent on sick leave for the whole of the leave year 2009-10.

“During that year she neither took paid annual leave nor did she request NHS Leeds to carry it forward to the next leave year (2010-11).

“Very early on in that year she was dismissed.

“NHS Leeds refused to pay her for the leave not taken by her in 2009-10.”

Lord Justice Mummery said both the employment tribunal and the employment appeal tribunal found in favour of Mrs Larner.

Mrs Larner, who went on sick leave in January 2009 and never returned to work, was diagnosed with chronic fatigue syndrome.

The employment tribunal held that NHS Leeds “had made unlawful deductions from the claimant’s wages” and had acted in breach of the 1998 Working Time Regulations “by not paying her, on the termination of her employment, wages in lieu of the paid annual leave that had accrued while she was on sick leave throughout 2009-10”.

The appeal judges ruled that NHS Leeds “has not established that there was any error of law” in the judgment of the employment tribunal in favour of Mrs Larner or that the decision of the employment appeal tribunal “to dismiss its appeal from that judgment was wrong”.