The Current System

Currently, the Organisation for Working Time Act 1997 (the “1997 Act”) provides for a minimum entitlement of four weeks’ paid annual leave. The 1997 Act provides that annual leave is calculated on the basis of time worked and is silent on the issue of how time spent on sick leave should be regarded for the purposes of calculating annual leave entitlements (apart from stating that a sick day shall not be regarded as a day of annual leave).

European Developments

In the Court of Justice of the European Union (“CJEU”) cases of Schultz-Hoff/Stringer (2009), the CJEU ruled that employees could accrue annual leave while on sick leave. Subsequently, in the KHS case (2011), the CJEU ruled that national law could put a cap on the unlimited accrual of annual leave during successive years of absence on sick leave.

In July 2014, the European Commission issued a Letter of Formal Notice to Ireland indicating that the Commission considers that the relevant provisions of the 1997 Act are incompatible with Article 7 of the Working Time Directive (entitlement to annual leave while on sick leave) as set down in the CJEU case law.

Changing the Law

In light of the above developments, Minister of State for Business and Employment, Ged Nash, announced the Government’s decision to amend the 1997 Act through the provisions of the Workplace Relations Bill 2014.

This amendment provides that for the purposes of annual leave, a day that an employee was absent from work due to a certified illness shall be deemed to be a day the employee was at work and performing his or her duties.

The amendment further provides that where an employee was unable to take all or any of his/her annual leave during a leave year due to a certified illness, the leave may be taken within the period of 15 months after the end of that leave year. The Minister is satisfied that the 15 month period “strikes the right balance between respecting the rights of vulnerable workers … and trying to minimise the cost to business and the Exchequer”.

This change will have significant repercussions for employers in Ireland. It will mean that even when an employee is off sick, he or she will accrue his or her annual leave entitlement and the employer will be obliged to pay for annual leave in circumstances where an employee is not adding to the business. The change is also likely to have an impact on the process to terminate employees who are absent on long-term sick leave.

In advance of the change, employers should review their policies on sickness and annual leave to ensure that proper employee reporting procedures are in place. Please get in touch with one of the team if you would like to discuss further.

Given the costs involved, one thing is certain, this issue will be hotly debated in the coming months!