On 1st August 2015, section 86(1) of the Workplace Relations Act, 2015 was brought into effect by the Workplace Relations Act (Commencement) Order 2015 [S.I. No. 338/2015]. This is an important change to the law and one of note for employers nationally. The effect of this section is to bring Irish legislation in line with European Law in relation to the accrual of annual leave during a period of sick leave.

Necessity for Change

This change to the law arose out of the need to implement the Court of Justice of the European Union (CJEU) rulings on the accrual of annual leave entitlement during sick leave. These CJEU rulings, starting with the Schultz-Hoff/Stringer cases in 2009, relate to the court’s view that Article 7 of the EU Directive on Working Time (the “Working Time Directive”) requires that employees are entitled to accrue annual leave while out on sick leave.

The Organisation of Working Time Act, 1997 (the “OWT Act”) however, which implemented the Working Time Directive in Ireland, provided that annual leave was calculated on the basis of time actually worked and was silent on how time spent on sick leave should be regarded for the purposes of calculating annual leave.

A disconnect then developed in Irish employment law, arising out of the CJEU case law, whereby public sector employees, who benefit from the doctrine of Direct Effect, had the benefit of the rulings and accrued annual leave during a period of sick leave, whereas private sector employees did not.

Arising out of this disconnect and where it was apparent that Irish legislation was at odds with EU law, a complaint was made to the EU Commission in December 2013, resulting in the Commission carrying out an investigation into Ireland’s conformity with EU law. In July 2014 the Commission issued a Letter of Formal Notice to Ireland indicating that it was the position of the Commission that the relevant provisions of the Organization of Working Time Act were incompatible with Article 7 of the Working Time Directive and CJEU case law.

This led to the amendment of the OWT Act.

Section 86(1)

Section 86(1) of the Workplace Relations Act, 2015 amends Sections 19, 20 and 23 of the OWT Act as follows:

  1. Employees will accrue statutory annual leave entitlement during a period of certified sick leave.
  2. There will be an annual leave carryover period of 15 months for those employees who could not, due to illness, take annual leave during the relevant leave year or during the normal carryover period of 6 months after the end of the leave year.
  3. On termination of employment, payment in lieu of untaken annual leave will apply to leave which was untaken as a result of illness in circumstances where the employee leaves the employment within a period of 15 months following the end of the leave year during which the leave entitlement accrued.

Practical Implications for Employers

What this means for employers is, as and from 1 August 2015, all employees may be entitled to accrue annual leave during a period of certified sick leave. The legislation is not retrospective and only applies from the date of enactment, being 1 August 2015. It is also noteworthy that, in order to avail of the entitlement, employees must provide a medical certificate in respect of their absence to their employer. This is an important qualification and one that should be echoed in every employers’ employment policies and contracts.

Also of particular note is that employees will only accrue statutory annual leave entitlement, which for a full time employee is four weeks’ paid annual leave. The changes, therefore, do not apply in respect of any additional contractual annual leave entitlements an employee may be entitled to, above their statutory entitlement.

In relation to the carry over period, it is clear that employees are permitted to carry over accrued annual leave for a period of 15 months after the leave year in question. It is appropriate that this limitation has been placed on the carry over period as it would be an extremely significant financial burden on employers if the carry over period was unlimited.

It is open of course to individual employers to provide for more favourable arrangements, than the statutory provisions in the OWT Act in relation to both the accrual of statutory only annual leave during sick leave and the carry over period for annual leave. Employers are advised to consider their position in this regard and it is recommended they update their policies and contracts accordingly to take account of the changes and of their own organisational position.

Particular care must be taken with employees on long term sick leave, who will have accrued annual leave during their absence, which will be necessary to take into account when the employee returns to work, or if the employee’s employment is being terminated. From a practical perspective, what this will entail for employers is a mathematical exercise when an employee returns to work, or whose employment is terminated, following a period of long term sick leave, in order to determine the amount of annual leave to which they are entitled to.

In line with Section 27 of the OWT Act, an employee may bring a complaint to an Adjudication Officer for breaches of this provision, who may do one or more of the following:

(a) Declare that the complaint was or, as the case may be, was not well founded,

(b) Require the employer to comply with the relevant provision,

(c) Require the employer to pay to the employee compensation of such amount (if any) as is just and equitable having regard to all the circumstances, but not exceeding 2 years remuneration in respect of the employee's employment.

Conclusion

Arising out of this significant change to employee entitlements on sick leave, employers should ensure that their contractual documentation and employee handbooks reflect this legislative change. It would also be advisable to ensure employees on long term sick leave are properly managed due to the financial implication of the change for employers.