New Sick Leave Holiday Entitlement
Under current Irish legislation, employees do accrue statutory holiday entitlement while absent on sick leave. The Organisation of Working Time Act 1997 awards holiday entitlement for time actually worked.
That will soon change and employers may be exposed to holiday pay claims of up to 9 weeks pay from employees whose employment is terminated following a period of certified long-term sick leave.
Section 87 of the Workplace Relations Bill, a provision tagged on to legislation designed principally to fundamentally reform the State’s existing employment rights and industrial relations structures, will soon be enacted to remedy Ireland’s failure to properly implement the Working Time Directive 2003/88. Such failure became evident in 2009 when the Court of Justice of the European Union (CJEU), in a combined decision in the Schulz-Hoff / Stringer cases, declared that under the Directive an employee accrues annual leave even during a sickness absence provided that sickness absence is certified. The CJEU further held that such leave must be taken within 15 months of the end of any given leave year. It was not, however, until after receipt in July 2014 of a Letter of Formal Notice from the European Commission, that a move was made to change the law in Ireland.
The amending legislation (section 87), currently before Seanad Éireann, brings clarity to the situation. It provides that:-
- certified sickness absence shall be deemed to be time actually worked when calculating holiday entitlement.
- if the employee as a result of illness is unable to take all/part of his/her holiday entitlement during that leave year (or within 6 months of that leave year, if deferred with the employee’s agreement), the entitlement must be availed of within 15 months of the end of the leave year to which it relates;
On the one hand this is an added expense for employers to bear. On the other, it caps the exposure as the entitlement lapses 15 months after the end of the leave year to which it relates. A statutory leave year under the 1997 Act is the 12 months running from 1st April.
Pending enactment of the amending legislation, the Directive, which has direct effect on EU Member States, is binding on the Irish State, thereby benefiting state and public employees. Private sector employees must, however, await the enactment of section 87 of the Workplace Relations Bill before they can seek to enforce the same entitlement against their employers. Arguably private sector employees could claim against the State for losses arising from Ireland’s failure to properly implement the Directive.
Employers may only pay in lieu of statutory (as opposed to contractual) holiday entitlement in the event of termination of the employment. Such payment would be at the normal rate of pay which generally means salary and usual contractual overtime, bonuses or commission (which, in the event of variation, would be averaged over the immediately preceding 13-week period). Employers who provide holiday entitlement over and above statutory entitlement may still by contract provide that such additional holiday is not accrued during sick leave, whether or not certified. Such employer may also contract that statutory sick leave is taken ahead of additional sick leave, thereby minimising potential exposure.
At present, per the decision in Royal Liver –v- Macken (2002), a claim for statutory holiday entitlement under the 1997 Act must relate to the entitlement accrued during the 18-month period prior to the date of claim. It is likely that following the enactment of section 87, this 18-month restriction will not apply to claims for statutory holiday entitlement which accrued during sick leave. Using the logic applied in the Royal Liver case, an extended claim period of 27-months prior to the date of claim may, arguably, apply to statutory holiday entitlement which accrued during long-term sick leave. This would translate to a maximum payment/award of 9-weeks normal pay in lieu of holiday entitlement upon termination of that employment, whether that termination is instigated by the employer or the employee.
The amending legislation while providing clarity to employers vis-a-vis their obligations towards their employees, may also cause those employers to be more pro-active in managing long-term/frequent sickness absence in an effort to avoid the cost of the associated holiday entitlement. In doing so, an employer must also take account of the prohibition against discrimination on the disability ground and the duty to reasonably accommodate such disability per the Employment Equality Acts 1998-2011.
Copyright © McKeever Solicitors, 31st March 2015.
This article is a general summary on the subject and is not intended to be a thorough review or a complete statement of the law. Specific legal advice should be sought on a case by case basis. For further information please contact Andrew Clarke or Ciara Meskell.
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