22 04 2020 Insights Employment Law

Annual leave during the Covid-19 crisis – How do I handle it?

Reading time: 4 mins


“What happens to employees who are on temporary lay-off or those on the wage subsidy scheme, do they continue to accrue annual leave and public holidays? Can we insist that employees take all accrued annual leave to date? How do I handle it?”

Annual leave and public holidays are governed by the provisions of Part III of the Organisation of Working Time Act 1997 (the ‘Act’) which provides an entitlement to paid annual leave as follows:

  • 4 working weeks in a leave year in which he or she works at least 1,365 hours (unless it is a leave year in which he or she changes employment),
  • one-third of a working week for each month in the leave year in which he or she works at least 117 hours, or
  • 8 per cent of the hours he or she works in a leave year (but subject to a maximum of 4 working weeks)

Many employees have sought to take annual leave to cover childcare responsibilities arising from the closure of schools and crèches. Many employers too are keen to have employees avail of their entitlement to accrued annual leave so that once the crisis passes, they are poised to mobilise the workforce and meet increased demand without having to cater to a large volume of annual leave requests. Section 20 (1) of the Organisation of Working Time Act provides that the times at which annual leave is granted are determined by the employer. In that regard, the employer should have regard to the opportunities for rest and recreation available to the employee but also the need for the employee to reconcile work and any family responsibilities. In addition, under the legislation the employer is required to consult with the employee or their Trade Union at least one month prior to the taking of leave. In the current climate, however, we are noting an acceptance by employees of measures being taken by their employers in response to the Covid-19 crisis, to include the mandatory taking of annual leave.

Annual leave and lay-off/Covid-19 Wage Subsidy Scheme

As outlined above, an entitlement to annual leave arises under the Act on the basis of hours worked, with the exception of sick leave. Therefore, where employees are on a period of temporary lay-off, they do not accrue an entitlement to annual leave during the period of lay-off. Employees who are placed on short time accrue an entitlement in respect only of hours worked during that period of short time.

However, it should be noted that that on an annualised basis, an employee may still achieve the requirement of 1,365 hours within the leave year, even where they have been placed on a period of temporary lay-off. This therefore, will need to be considered once the lay-off ceases and employees return to the workforce.

Similar principles apply for those employees who are on the Covid-19 Wage Subsidy Scheme, but are not working, thereby being on ‘de-facto’ lay-off.

This position is support by case-law emanating from the Courts of Justice of the EU in the case of Heimann & Toltschein [Alexander Heimann (C-229/11) and C-230/11 and Konstantin Toltschein (C-230/11) v Kaiser GmbH].

In this case, two workers, employed by a German firm, Kaiser GmbH, were initially going to be made redundant but as part of an agreed social plan, were then given employment contracts as ‘zero hours short-time workers.’ This had the effect of extending their employment contracts for one year, however they were not required to work and therefore their employer did not pay their salary. They did however receive a financial allowance from Germany’s Federal Employment Agency, in the amount of their salary, which was paid through their employer. At the end of the year, the workers said they should also receive compensation for unpaid annual leave given that they were still employed by Kaiser. The ECJ ruled against them and took the following factors into consideration:

  • The right of every worker to paid annual leave and the social law principle underpinning it, should not be interpreted restrictively.
  • That the short-time working was based on an agreed social plan providing for the suspension of the reciprocal obligations of the employee and the employer as regards work and salary.
  • That the works were free to rest or undertake leisure activities. Accordingly, they were in a situation different from that resulting from an inability to work due to illness. The Court distinguished between short-time zero hours working and someone on sick leave from work.
  • Finally, the ECJ highlighted that the aim of the social plan was to delay the workers’ dismissal for financial reasons and thus reduce the negative impact of the dismissal. The ruling stated: Linking the benefit of that advantage granted to the worker by national law to the employer’s obligation to pay for paid annual leave during the period of the formal extension, for purely social reasons, of the employment contract, would be liable to make the employer reluctant to agree to such a social plan and, consequently, deprive the worker of its positive effects.

Public holidays

The statutory position in respect of public holidays is set out in Section 21 of the Act and it is open to the employer to determine how the day will be dealt with. There are four options in that regard namely:

  1. a paid day off on that day,
  2. a paid day off within a month of that day,
  3. an additional day of annual leave,
  4. an additional day's pay

Under the legislation, employees who are on lay-off for more than 13 weeks lose their entitlement to any subsequent public holidays.

Contract of Employment

Whilst the Act deals with the statutory provision concerning annual leave, it will also be necessary to consider the contracts of employment in place and determine how rights to annual leave are reserved therein. Many contracts simple state that annual leave and public holidays will be granted in line with the provisions of the Organisation of Working Time Act 1997, in which case the provisions outlined above apply. However, some contracts provide for additional days in excess of statutory requirements or do not align themselves with the provisions of the Act. In such cases an employee may have a contractual right to paid annual leave even where they are on a period of lay-off or not in a position to work due to the current crisis.

In conclusion, it is too simplistic to say that employees on lay-off have no entitlement to annual leave. Whilst it is certainly the case that time spent on lay-off will not be considered for the purposes of calculating an entitlement, this is not determinative of an employee’s overall entitlement to annual leave. Furthermore, contracts of employment will require review to determine whether an employee has a contractual right reserved over and above the statutory position.

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