EU Court Ruling on Annual Leave

According to the Court, the entitlement to annual leave of a worker on sick leave duly granted cannot be made subject to an obligation that the worker should have done some work for the employer in the year in question.

The ECJ first noted the fact that it had already ruled that a period of leave guaranteed by Community Law could not affect the right to take another period of leave guaranteed by that law.

According to the ECJ, "although the Court has accepted that member states are free to lay down, in their domestic legislation, conditions for the exercise and implementation of the right to paid annual leave, it has nevertheless made clear that member states are not entitled to make the very existence of that right ... subject to any preconditions whatsoever".

In Irish law, it is the employer who determines when annual leave is to be taken. Irish law therefore does not have to deal with any issue of an employee failing to carry over their statutory minimum leave, as it is the employer's responsibility to ensure that that leave is taken. Under Irish law, if the employer wishes, and with the consent of the employee, the leave may be carried over for a period of up to six months after the statutory leave year.

However, in Ireland an employee is only entitled to statutory annual leave as follows:

Four working weeks leave, in any leave year in which he/she works at least 1,365 hours OR One third of a working week for each month in the leave year in which he/she works at least 117 hours OR 3. 8% of the hours he/she actually worked in a leave year up to a maximum of four working weeks.

The effect of these provisions are that when an employee is sick for the entirety of the leave year, an employee is entitled to no statutory annual leave, as they did not qualify under any of the above criteria for any leave time.

Annual leave must continue to accrue during sick leave, but the state is not prevented from legislating that the leave may not be taken during the period of absence on sick leave.

As it is the employer who chooses the timing of the leave in Ireland; it is therefore open to Irish employers not to pay the annual leave during the period of absence, but the leave itself would still accrue to be taken at a later date.The ECJ also found that employees who have not taken their annual leave are entitled to be paid in lieu for same at the time of their termination at their normal remuneration rate.This case is likely to have major implication for Member States and many large employers. In is not uncommon for many large employers (both Public and Private) to have a number of employees on long term sick leave, often under income continuance schemes. Many of these employees are now likely to claim back holiday pay, and the financial impact of this could be considerable.Summary Of Courts Findings

• Annual leave must continue to accrue during sick leave, but the State is not prevented from legislating that the leave may not be taken during the period of absence on sick leave.
• An employee who has not had to opportunity to take the leave cannot have the leave extinguished, even if any carry forward period has expired.
• Employees who have not taken their annual leave are entitled to be paid in lieu for this leave at the time of their termination at their normal remuneration rate.

What Actions Should Employers Take?

• Robustly manage all sickness and absence.

Ensure that employment contracts provide the contractual leave over and above the statutory minimum does not accrue during sick leave, and that in any leave taken by the employee the statutory leave is deemed to be taken first.