Employers should be aware that since 1 August 2015 employees in both the public and private sector now accrue statutory annual leave while on sick leave. This could mean a significant additional cost to employers where employees are on long term sick leave.

Position prior to the Workplace Relations Act

Before the enactment of the Workplace Relations Act 2015 (the “Workplace Relations Act”), employees on long term sick leave and working in the private sector were not entitled to accrue annual leave while on long term sick leave. This was because the Organisation of Working Time Act 1997 (the “Working Time Act”) provided that the accrual of annual leave was based on hours actually worked.

CJEU Case law

Following from the decisions of the Court of Justice of the European Union (“CJEU”) of Schultz-Hoff v Deutsche Rentenversicherung Bund and Stringer v HM Revenue and Customs, it became apparent that this element of the Working Time Act was inconsistent with European law. The CJEU held that workers continue to accrue annual leave while on sick leave and are entitled to take that annual leave after sick leave ends.

Irish decisions

After the European position became clear, decisions in this jurisdiction followed suit but only in relation to the public sector as the Working Time Directive (2003/88) (the “Directive”) was held to be directly applicable to State employers but not  to private sector employers who would effectively be the innocent party in a situation where the Directive had not been correctly implemented into Irish law.

Changes brought about by the Workplace Relations Act

The Workplace Relations Act amends the Organisation of Working Time Act in the following manner:

  • Employees on certified sick leave will be considered to have been actually working for the purposes of calculating annual leave entitlement.
  • Employees who cannot take annual leave during that leave year (or within 6 months with the agreement of the employer) as a result of illness must take any accrued annual leave within 15 months of the end of the leave year to which it relates.

So what do these changes mean for employers?

  • This change will be a significant additional cost for employers. However, it is positive that there is a cut off point within which any annual leave accrued will be lost if not used (unless otherwise agreed with the employer).
  • It is important to note that an employer may not pay an employee in lieu of accrued statutory leave entitlements except on termination of employment so an employee is entitled to take the accrual as actual time off.
  • It is important to also note that these changes only apply to statutory annual leave entitlements and that an employer can still specify that any contractual leave entitlement over and above statutory entitlement will not accrue during sick leave. This should be stated in the employment contract or handbook.
  • These changes mean that employers, having suffered the absence of an employee during long term sick leave, will have an additional period of absence for accrued annual leave when the employee does return to the workplace.
  • It is likely that this will make employers more proactive about managing long term sickness absence in the workplace. However, employers must still be mindful of their obligations under equality legislation to provide reasonable accommodation to employees with a disability.