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When Paid Leave and Sick Leave Collide

May 2017 - Employment. Legal Developments by GVZH Advocates.

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As stated by the European Court of Justice (“ECJ”), the right of employees to paid annual leave is a “particularly important principle of the European Union social law” which cannot be derogated from the competent local authorities or practices, such as collective agreements, and whose implementation by the said authorities or practices must not fall short of the minimum requirements imposed by European law.

The right to paid annual leave has indeed the dual purpose of enabling the worker both to rest from carrying out the work s/he is required to do under his contract of employment and to enjoy a period of relaxation and leisure (please refer, among others, to ECJ, case C-214/10 KHS AG v Schulte, judgment 22nd November 2011). On the other hand, employees are also entitled to sick leave when they are unwell in order for them to be able to recover from their illness. However, many employees are not aware of their rights in the event that they, while being on scheduled paid annual leave, become unwell.

VACATION AND SICK LEAVE: THE LOCAL LEGAL CONTEXT

According to the Organization of Working Time Regulations (i.e. Subsidiary Legislation 452.87 of the Laws of Malta, the “Regulations”) a full-time employee is entitled to one hounded and ninety-two (192) hours of paid annual leave which is equivalent to four (4) weeks and four (4) working days, without prejudice to any other legal provision which may apply in respect of employees working in a particular sector.

If the average normal hours (excluding overtime) calculated over a period of 17 weeks is below or exceeds forty (40) hours per week, the vacation leave entitlement in hours is adjusted accordingly. In this respect, it must be highlighted that during the period of employment a minimum period equivalent to four weeks (i.e. 160 hours) cannot be replaced by any allowance, and thus the employee cannot claim payment in respect of such minimum period. On the other hand, once terminated, an employee has the right to claim financial compensation for any leave which was not availed of during the last year of the employment relationship.

Additionally, the employee is required to utilise the accrued vacation leave by the end of each calendar year, unless there is an agreement with the employer providing that up to 50% of the annual leave entitlement can be carried forward to the following year. The employer may give a specified time-period (e.g. until May) when the leave is to be taken. The said vacation leave carried forward from the previous year is to be utilised first, and may be not carried forward again.

According to the Minimum Special Leave Entitlement Regulations (i.e. Subsidiary Legislation 452.101), a full-time employee is also entitled to two (2) working weeks sick leave in every calendar year without loss of wage, without prejudice to any other legal provision which may apply to employees working in a particular sector. More specifically, the first three (3) days of any claim for sick leave are to be paid in full by the employer. If the period of sick leave exceeds 3 days, the daily wage is deducted by the employer and refunded by the Social Security Department upon employee’s request. Any sickness benefit to which the employee may be entitled to under the Social Security Act (i.e. Chapter 318 of the Laws of Malta) is deductible from the said wage entitlement.

THE MOOT POINT: WHAT HAPPENS WHEN AN EMPLOYEE ON PAID LEAVE BECOMES SICK?

As above-mentioned, the purpose of paid annual leave is to enable a worker to rest and enjoy a period of relaxation and leisure, and it is different from the purpose of sick leave, which is to enable a worker to recover from an illness.

The original position was that workers who fall sick before a period of annual vacation leave can reschedule that leave period so that it does not clash with their sick leave. This developed later on so that a worker who is on sick leave during a period of previously scheduled annual leave should be able to take the annual leave during a period that does not coincide with the period of sick leave.

Consequently, a worker is entitled to take paid annual leave (when this coincides with a period of sick leave) at a later point in time, irrespective of the point at which the incapacity for work arose. As affirmed by the ECJ, no employee may be deprived of his/her paid leave guaranteed by Article 7(1) of Directive 2003/88 concerning certain aspects of the organisation of working time through absence by reason of illness. Indeed, as stated by the ECJ, “the right to paid leave is a particularly important principle of Community social law and its existence cannot be made subject to any preconditions” (kindly refer, among other things, to ECJ Case C-520/06, Stringer and others v. Her Majesty’s Revenue and Customs, judgement 20th January 2009).

More specifically, the ECJ has clarified that even though Member States may in principle prohibit taking annual leave during a period of sick leave, the employees concerned must be able to exercise their rights effectively during another period and thus to carry the said period over.

On the other hand, Member States may in principle limit the possibility of exercising the right to paid leave, in particular by being able to impose a time limit for the carry-over of leave since it is allowed by the above-mentioned Article 7. Therefore, an employee who is unfit for work for several consecutive reference periods does not have right to accumulate without any limit entitlements to paid annual leave acquired during the said periods (kindly refer, among other things, to ECJ Case C-520/06, Stringer and others v. Her Majesty’s Revenue and Customs, judgement 20th January 2009, and to the above-mentioned ECJ Case C-214/10, KHS AG v. Winfried Schulte, judgement 22nd November 2011).

In this regard, reference should be made to Article 9(1) of Convention No. 132 of the International Organisation of 24th June 1970 concerning Annual Holiday Pay providing that the uninterrupted part of the annual holiday with pay must be granted and taken no later than one (1) year, and the remainder of the annual leave with pay no later than eighteen (18) months from the end of the year in respect of which the holiday entitlement has been arisen.

In light of the above, it is clear that the Maltese Regulations should be updated in order to include the scenarios which have already been tackled by the European Courts, as has already been done by other European countries (e.g. UK).