Entitlement to Carry Over Annual Leave
Background
The case of Martin Beirne v Health Service Executive (HSE) (ADJ-00040093) examines the circumstances under which an employer will be held liable for any accrued but untaken holiday pay from previous annual leave periods.
Mr. Beirne (the Complainant) brought a complaint under 27 of the Organisation of Working Time Act, 1997 against the HSE (the Respondent) to the Workplace Relations Commission (WRC), alleging that he was unpaid annual leave from 2007 until the cessation of his employment in 2022.
The Respondent argued that the jurisdiction of the WRC was limited to 6 months from the filing of the complaint which could be extended to 12 months under exceptional circumstances.
Complaint pursuant to section 27 of the Organisation of Working Time Act
Section 27 of the Organisation of Working Time Act provides:
‘A decision of an adjudication officer under section 41 of the Workplace Relations Act 2015 in relation to a complaint of a contravention of a relevant provision shall do one or more of the following, namely: (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 of the circumstances, but not exceeding 2 years ’ remuneration in respect of the employee’s employment.’
Cognisable period
The cognisable period for complaints pursuant to section 27 is set out in section 41(6) of the Workplace Relations Act. It states: ‘Subject to subsection (8), an adjudication officer shall not entertain a complaint referred to him or her under this section if it has been presented to the Director General after the expiration of the period of 6 months beginning on the date of the contravention to which the complaint relates.’
Section 41(8) provides that the cognisable period can be extended by a further 6 months, should the complainant establish reasonable cause in the late presentation of the complaint.
Entitlement to annual leave
Section 19 of the Organisation of Working Time sets out the entitlement to annual leave. Full-time employees, such as the complainant, have a statutory right to four weeks of paid annual leave in any leave year.
Section 20 provides as follows in respect of the taking of annual leave:
‘(1) The times at which annual leave is granted to an employee shall be determined by his or her employer having regard to work requirements and subject— (a) to the employer taking into account— (i) the need for the employee to reconcile work and any family responsibilities, (ii) the opportunities for rest and recreation available to the employee, (b) to the employer having consulted the employee or the trade union (if any) of which he or she is a member, not later than 1 month before the day on which the annual leave or, as the case may be, the portion thereof concerned is due to commence, and (c) to the leave being granted — (i) within the leave year to which it relates, (ii) with the consent of the employee, within the period of 6 months after the end of that leave year, or (iii) where the employee — (I) is, due to illness, unable to take all or any part of his or her annual leave during that leave year or the period specified in subparagraph (ii), and (II) has provided a certificate of a registered medical practitioner in respect of that illness to his or her employer, within the period of 15 months after the end of that leave year.’
Entitlement to cesser pay
Section 23 of the Organisation of Working Time Act sets out the employee’s entitlement to cesser pay in compensation for a balance of annual leave not taken. Section 23 provides:
‘(1) (a) Where — (i) an employee ceases to be employed, and (ii) the whole or any portion of the annual leave in respect of the relevant period remains to be granted to the employee, the employee shall, as compensation for the loss of that annual leave, be paid by his or her employer an amount equal to the pay, calculated at the normal weekly rate or, as the case may be, at a rate proportionate to the normal weekly rate, that he or she would have received had he or she been granted that annual leave. (b) In this subsection — ‘relevant period ’ means — (i) in relation to a cessation of employment of an employee to whom subparagraph (i) of paragraph (c) of subsection (1) of section 20 applies, the current leave year, (ii) in relation to a cessation of employment of an employee to whom subparagraph (ii) of the said paragraph (c) applies, that occurs during the first 6 months of the current leave year (I) the current leave year, and (II) the leave year immediately preceding the current leave year, (iii) in relation to a cessation of employment of an employee to whom subparagraph (iii) of the said paragraph (c) applies, that occurs during the first 12 months of the period of 15 months referred to in the said subparagraph (iii) — (I) the current leave year, and (II) the leave year immediately preceding the current leave year, or (iv) in relation to a cessation of employment of an employee to whom subparagraph (iii) of the said paragraph (c) applies that occurs during the final 3 months of the period of 15 months referred to in the said subparagraph (iii) — (I) the current leave year, and (II) the 2 leave years immediately preceding the current leave year.’
Cesser pay is the ‘allowance in lieu’ referred to below in Article 7 of the Directive. Section 23 provides that it is payable for the ‘relevant period’. Ordinarily, the ‘relevant period’ is the current leave year (as the obligation is for annual leave to be taken within the leave year). Section 23(1)(b)(ii) addresses ‘relevant period’ where the period for leave to be taken has been extended by up to 6 months, with the employee’s consent. Section 23(1)(b)(iii) addresses ‘relevant period’ where the employee accumulates annual leave while on certified sick leave. The provision addresses this in two scenarios: one where employment ends within 12 months of the certified sick leave and a second, where the employment ends in the final 3 months of the period of 15 months.
Royal Liver Assurance v Macken [2002] 4 IR 427
In Royal Liver Assurance v Macken, the High Court held that the period of 20 days of annual leave must be granted to the employee within the leave year. Where this is not done, the Court held that the employer is obliged to consult with the employee to obtain their consent for the balance of leave to be granted within six months of the end of the leave year in question.
The High Court did not agree with the Labour Court’s conclusion that the date of contravention could be extended to include the six-month period that follows the leave year. The High Court pointed out that the effect of the Labour Court decision was that an employee could only submit a complaint after this further six-month period ended, so that the employee may be out-of-time.
The High Court held that the latest date of contravention to grant leave within a leave year is the last day of the leave year in question.
Working Time Directive
Article 7 of the Working Time Directive (2003/88/EC and its predecessor Directive 93/104/EC) sets out the entitlement to paid annual leave. It states:
‘Annual leave 1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2. The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.’
Sections 19, 20 and 23 of the Organisation of Working Time Act transposed this provision into Irish law.
Article 31 Charter of Fundamental Rights
Article 31 of the Charter on Fundamental Rights of the European Union addresses annual leave. It provides:
‘Fair and just working conditions 1. Every worker has the right to working conditions which respect his or her health, safety and dignity. 2. Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave.’
Interpretation of the Court of Justice of the European Union
The Court of Justice of the European Union (the ‘CJEU’) has made several significant decisions that touch on the carry-over of annual leave and the nature of the contravention at the termination of an employee’s employment. As noted by the High Court in Macken, the starting point is that the right to paid, unconditional annual leave is a ‘fundamental social right’. This is now reflected in the Charter of Fundamental Rights.
KHS v Shulte C-214/10
KHS involved an employee who was unable to work on serious health grounds between 2002 and 2008. The Court observed that ‘a provision of national law setting out a carry-over period for annual leave not taken by the end of the reference period aims, as a rule, to give a worker who has been prevented from taking his annual leave an additional opportunity to benefit from that right at the end of the reference period or of a carry-over period. However, the Court attached to that finding of principle the condition that a worker who has lost his right to paid annual leave must have actually had the opportunity to exercise the right conferred on him by that directive (see Shultz-Hoff and Others, paragraph 43).’
The CJEU noted that, where the employee is unfit for several consecutive reference periods, the unlimited accrual of annual leave would no longer reflect the actual purpose of the right to paid annual leave. The CJEU noted that ‘the carry-over period must also protect the employer from the risk that a worker will accumulate periods of absence of too great a length, and from the difficulties for the organisation of work which such periods might entail.’
The CJEU conclude that Article 7 did not preclude national provisions which limit the carry-over of paid annual leave to 15 months where a worker is unfit for work for several consecutive reference periods.
King v The Sash Window Workshop Ltd C-214/16
In King v Sash Window, the employee claimed 13 years of paid annual leave that he had been prevented from taking over the course of his employment. The employer had not paid annual leave as it treated the employee as being self-employed and not an employee.
At paragraph 65, the CJEU concluded ‘Article 7 of Directive 2003/88 must be interpreted as precluding national provisions or practices that prevent a worker from carrying over and, where appropriate, accumulating, until termination of his employment relationship, paid annual leave rights not exercised in respect of several consecutive reference periods because his employer refused to remunerate that leave.’
In the preliminary reference, the UK Court of Appeal had posited a maximum carry-over period of 18 months, but the CJEU did not agree to any such limitation.
To note, the relevant UK statute provided two causes of action: the right to take leave (Regulation 13) and the right to be paid for the leave (Regulation 16). Regulation 30 conferred the following right, subject to a limitation period:
‘(1) A worker may present a complaint to an employment tribunal that his employer — (a) has refused to permit him to exercise any right he has under — (i) regulation ... 13(1); ... or (b) has failed to pay him the whole or any part of any amount due to him under regulation ... 16(1). (2) An employment tribunal shall not consider a complaint under this regulation unless it is presented — (a) before the end of the period of three months ... beginning with the date on which it is alleged that the exercise of the right should have been permitted (or in the case of a rest period or leave extending over more than one day, the date on which it should have been permitted to begin) or, as the case may be, the payment should have been made; (b) within such further period as the tribunal considers reasonable in a case where it is satisfied that it was not reasonably practicable for the complaint to be presented before the end of that period of three or, as the case may be, six months.’
Max-Planck-gestelleschaft zur Forderung der Wissenschaften eV v Shimizu C-684/16
In Max-Planck, the national law in question provided that annual leave must be granted and taken in the course of the leave year; otherwise, it lapsed unless carried over under the terms of the provision. It provided that an allowance could be paid in lieu where the employment had terminated. In this case, the employee claimed 51 days of annual leave accruing in 2012 and 2013 (his employment ceased on the 31st December 2013).
The CJEU reaffirmed the position set out in preceding judgments that Article 7 did not preclude a national provision that resulted in an employee losing their entitlement to annual leave where they had the opportunity to exercise the right to annual leave but chose not to take leave.
Citing the employee as being the weaker party in the employment relationship, paragraphs 43 to 47 of the judgment refer to the burden resting on the employer to ensure that the employee had the opportunity to take paid annual leave.
At paragraph 46, the Court held ‘Should the employer not be able to show that it has exercised all due diligence in order to enable the worker actually to take the paid annual leave to which he is entitled, it must be held that the loss of the right to such leave at the end of the authorised reference or carry-over period, and, in the event of the termination of the employment relationship, the corresponding absence of a payment of an allowance in lieu of annual leave not taken constitutes a failure to have regard, respectively, to Article 7(1) and Article 7(2) of Directive 2003/88.’
The Court concluded that a national court hearing a complaint must ‘ensure that, should the employer not be able to show that it has exercised all due diligence in enabling the worker actually to take the paid annual leave to which he is entitled under EU law, the worker cannot be deprived of his acquired rights to that paid annual leave or, correspondingly, and in the event of the termination of the employment relationship, to the allowance in lieu of leave not taken which must be paid, in that case, directly by the employer concerned.’
Kreuziger v Land Berlin C-619/16
The Grand Chamber of the CJEU heard both Max-Planck and Kreuziger on the same day (29th May 2018) and also handed down both judgments at the same time (6th November 2018). In Kreuziger, the relevant regulation provided that entitlement to annual leave lapsed 12 months after the end of the leave year. The employee sought payment for untaken annual leave for the period of the 1st January to the 28th May 2010, when his employment ended on completion of his legal training.
Again, the CJEU reiterated that ‘it cannot be inferred from the Court’s case-law mentioned in paragraphs 30 to 33 of the present judgment that Article 7 of Directive 2003/88 should be interpreted as meaning that, irrespective of the circumstances underlying the worker’s failure to take paid annual leave, that worker should still be entitled to the right to annual leave referred to in Article 7(1), and, in the event of the termination of the employment relationship, to an allowance by way of substitution therefor, pursuant to Article 7(2).’
At paragraph 42, the CJEU held ‘the Court has in particular held that Article 7(1) of Directive 2003/88 does not in principle preclude national legislation which lays down conditions for the exercise of the right to paid annual leave expressly conferred by the directive, including even the loss of that right at the end of a leave year or of a carry-over period, provided, however, that the worker who has lost his right to paid annual leave has actually had the opportunity to exercise the right conferred on him by the directive.’
At paragraph 52, the CJEU cited that the burden lay on the employer: ‘the employer is in particular required, in view of the mandatory nature of the entitlement to paid annual leave and in order to guarantee the effectiveness of Article 7 of Directive 2003/88, to ensure, specifically and transparently, that the worker is actually given the opportunity to take the paid annual leave to which he is entitled, by encouraging him, formally if need be, to do so, while informing him, accurately and in good time so as to ensure that that leave is still capable of procuring for the person concerned the rest and relaxation to which it is supposed to contribute, that, if he does not take it, it will be lost at the end of the reference period or authorised carry-over period, or upon termination of the employment relationship where the termination occurs during such a period.’
Terveys-Ja Sosiaalialan Neuvottelujargesto (TSN) ry v Hyvinvointialan liito Ri C-609/17 and C-610/17
In TSN, the CJEU held that annual leave entitlement in excess of that required by the Directive is not within the scope of the Directive. The Finnish collective agreement in question could treat differently carry over of untaken annual leave (due to illness) between leave that fell within the four weeks provided under the Directive and leave in excess of this entitlement. The collective agreement could limit the carryover of untaken annual leave to four weeks.
Present Case
In A Facilities Coordinator v A Bakery (ADJ-00019188) the Adjudication Officer applied the CJEU authorities of KHS v. Shuite (C-214/10); King v. Sash Window Workshop (C-214/16); Max-Planck-gestelleschaft zur Forderung der Wissenschaften eV v. Shimizu (C-684/16); Kreuziger v. Land Berlin (C-619/16) Terveys-Ja Sosiaalialan Neuvottelujargesto (TSN) ry v. Hyvinvointialan Liito Ri (c-609/17 and C-610/17) which held that where the Employer is on notice that annual leave has not been availed unless the employer warns the worker that the failure to avail of the annual leave will result in it being lost, the leave carries over and remains extant as an accrued entitlement at the end (cesser) of the employment.
Decision
Ultimately, the Adjudication Officer decided that the Complainant in the present case, was devoid of any line management whatsoever, and this resulted in the Respondent, not clearly communicating his leave entitlements, during his last years of service. Notwithstanding this management and administrative oversight, it was held that, despite the protestations concerning the consignable period, there was an assumption that any unused annual leave, would carry over into the next annual leave period, if an employer has not taken sufficient steps, to provide or warn the employee concerned, that they are at risk of losing that annual leave, if not properly utilised.
The Adjudication Officer determined that:
“The decisions of Kreuizger v. Land Berlin and Max Planck v. Shimizu was applied by the WRC in Adj. 19188 [A Facilities Coordinator v. A Bakery]. I have found both the CJEU authorities and Adj. 19188 to be persuasive and helpful to assist with this decision.
In 2008 on in the context of a restructure of the HSE Estates section the Complainant’s role as a Property Manager was recommended to be abolished. However as no suitable alternative position for the Complainant could be found, he expected to be made redundant but this did not occur. Instead, the Complainant was maintained as Property Manager and given the role of supervising five staff in a section of HSE Estates but without any line management, reporting structure or any effective oversight. This resulted in the Complainant not being eligible for promotion, training or career advancement. But it also meant that on a day to day basis, he had no one to report to and therefore he had no one to sanction if and when he took annual leave. This unusual situation pertained until he applied to take retirement in April 2022 at which point he raised the fact that he had outstanding annual leave that he had carried over each year from 2007.
Adj. 19188 [A Facilities Coordinator v. A Bakery] is clear in its finding. Applying Kreuziger, an employer is required (in view of the mandatory fundamental right to paid annual leave as per Article 7 of Directive 2003/88) to ensure that the worker is both given the opportunity to take paid annual leave and if it is to be lost through non-use, that the worker must be put on notice of this in advance of its loss.
This did not occur in any respect. I have heard no evidence from either party that even any conversation took place between the Respondent and Complainant about him not taking enough annual leave, the carry-over of annual leave, whether it could be lost if he didn’t take it, indeed anything about annual leave at all.
In the present case, there was no communication between the Respondent and the Complainant to ensure in the first instance that he was taking his annual leave entitlement or in the alternative that if he did not take the leave, that it would not carry over or he was at risk of losing it.”
Takeaway
The takeaway for employees considering bringing a complaint under the Organisation of Working Time Act, for accrued but untaken holiday pay, is to determine what their entitlements were on an annual basis, how many days annual leave were actually taken, and calculate the requisite deficit.
For employers, it will be necessary to demonstrate that they afforded their employees an opportunity to avail of annual leave and warned them of the consequences of not availing of that annual leave, before the annual leave period expired.
Further information
This article was prepared by Barry Crushell for informational purposes only. For further advice, please email contact@crushell.ie or contact the offices of Crushell & Co Solicitors.