Complainant

Respondent

Parties

Richard Lynch

National Agrochemicals Distributors Ltd

Representatives

O'Mara Geraghty McCourt

Callan HR Consultants

Act

Complaint Reference No.

Date of Receipt

Complaint seeking adjudication by the Workplace Relations Commission under section 6 of the Payment of Wages Act 1991

CA-00068277-001

20/12/2024

Complaint seeking adjudication by the Workplace Relations Commission under section 27 of the Organisation of Working Time Act 1997

CA-00068277-002

20/12/2024

The material facts of this case were not in dispute; the issue between the parties concerned the application of the law to those facts.

The complainant was employed by the respondent initially as a Technical Sales Representative and then as an Agronomist until he resigned on 5 July 2024.

The complaints for adjudication relate to untaken annual leave in each of the years from 2019 to 2023, pursued in the first instance under the Payment of Wages Act 1991 as an allowance payable on termination of the complainant’s employment in July 2024, or as compensation on cesser of employment under the Organisation of Working Time Act 1997.

The primary complaint is that referred under the Payment of Wages Act 1991.  The complaint under the Organisation of Working Time Act 1997 supports or is presented in the alternative to the primary complaint.

The complainant had a contractual entitlement to 22 days annual leave per annum.  The respondent’s leave year ran from 1 January to 31 December.

From 2019 to 2024, the complainant was unable to take all of his annual leave.  Information was provided as to the complainant’s annual salary and leave taken in the relevant years.

The complainant’s untaken annual leave in the period 2019-2023, which amounted to 40 days, accrued as an allowance at the termination date as the complainant was not given an opportunity to take leave during employment.  The onus was on the respondent to ensure that the complainant availed of annual leave, and, where it failed to do that, the allowance for annual leave became payable on the termination of employment. The case of Ryszard Kulbaka v Drumlonan Pork Limited (ADJ-00029622) was cited in support of the complainant’s case.

In contravention of the Organisation of Working Time Act 1997, the complainant did not receive, on termination of employment, compensation for the accrued untaken leave in respect of the leave years 2019 to 2023.

The complainant’s evidence concerned the management line between the complainant and the respondent’s Sales Director at the relevant time, and how the complainant submitted requests for annual leave to the Sales Director.  Discussions concerning leave were informal in nature.   The complainant discussed carryover of annual leave days with the Sales Director, and whilst it was anticipated the days would be taken by the complainant, this did not happen due to work pressures.  The complainant was never told that he would lose his annual leave if he did not take it within the leave year or that he had to take annual leave during the year.   Under cross-examination, the complainant’s evidence was that the respondent was aware of the number of days accrued as the complainant had advised the Sales Director of same.  The complainant kept track of his annual leave days, and the Sales Director was aware of the days taken by the complainant and the days carried over from 2019.  The complainant was never told the days were not being carried forward.   Communications with the Sales Director were mostly verbal; the respondent was a small organisation and the complainant never raised a concern in writing as regards annual leave.  The demands of the role meant that the complainant was under pressure not to take the days.

The complainant held a senior position in the respondent organisation. 

There was a contract of employment which expressly provided that annual leave should be taken within the period January to December.  The contractual terms displace the concept of an allowance payable on termination of employment, as submitted by the complainant.  The Kulbaka case can be distinguished as there was no written contract of employment in that case.   There is no authority for annual leave payable as an allowance where there are contractual terms in place.

The evidence of Mr Judge confirmed that he commenced employment with the respondent 9 months prior to the hearing date.  He had reviewed the complainant’s HR file but had no direct knowledge or experience of the complainant in his former employment with the respondent.  

It was common case that the complainant’s contractual annual leave entitlement in employment was 22 days per annum.

It was agreed that from 2019 to 2023, the complainant took annual leave as follows:-

2019 – 16 days

2020 – 14 days

2021 – 13 days

2022 – 13 days

2023 – 14 days.

The complainant’s annual salary in the period from 2019 to 2023 varied.  The financial value of untaken leave days in the relevant years was agreed. 

A holidays clause in the complainant’s contract of employment provided for the grant of annual leave in accordance with Part III of the Organisation of Working Time Act 1997, and that leave may be taken at such time/s as the respondent considers most convenient having regard to its business requirements and the wishes of the employee.  It also stated that further information on annual leave can be found within an Employee Handbook.

An appendix to the contract detailed the 22-day annual leave entitlement and contained the following further information:-

“Arrangements for availing of annual leave must be made with the agreement of your Supervisor/Manager to ensure that the operation of [the respondent] and its service to its members is not adversely affected.  The annual leave period is from January to December, and all annual leave should be taken within this period.

…

The company reserves the right to designate a period as obligatory holidays.”

The complainant’s uncontested evidence was that there was no Employee Handbook provided. 

The complainant is seeking the value of untaken annual leave in respect of the period 2019 to 2023 which it asserts accrued and became payable on termination of employment.  The case did not concern annual leave entitlements in respect of the 2024 leave year. 

Payment of Wages Act 1991

Section 1 of the Payment of Wages Act 1991 (the “1991 Act”) defines wages in relation to an employee as meaning:-

“…. any sums payable to the employee by the employer in connection with his employment, including—

(a) any fee, bonus or commission, or any holiday, sick or maternity pay, or any other emolument, referable to his employment, whether payable under his contract of employment or otherwise, and

(b) any sum payable to the employee upon the termination by the employer of his contract of employment without his having given to the employee the appropriate prior notice of the termination, being a sum paid in lieu of the giving of such notice: Provided however that the following payments shall not be regarded as wages for the purposes of this definition:

(i) any payment in respect of expenses incurred by the employee in carrying out his employment,

(ii) any payment by way of a pension, allowance or gratuity in connection with the death, or the retirement or resignation from his employment, of the employee or as compensation for loss of office,

(iii) any payment referable to the employee's redundancy,

(iv) any payment to the employee otherwise than in his capacity as an employee,

(v) any payment in kind or benefit in kind,

(vi) any payment by way of tips and gratuities.”

Section 5 of the 1991 Act prohibits deductions from wages save in certain circumstances.  Section 5(6) of the 1991 Act provides that where on any occasion an employee is paid less than the total amount of wages that is properly payable to the employee on that occasion, the amount of the deficiency or non-payment is to be treated as a deduction. 

The issue for adjudication is whether on termination of employment in July 2024, a sum in respect of untaken leave from the period 2019-2023 was properly payable to the complainant within the meaning of the 1991 Act. 

I am not satisfied that the evidence supports an entitlement to payment for untaken leave from preceding years on cessation of employment. 

The written contract of employment did not address what was to occur if annual leave was not taken within the relevant leave year.   The complainant’s oral evidence was of discussion with his line manager that carried over leave would be used in the following year.  There was no evidence of an agreement between the complainant and his line manager, or otherwise, that carried over leave would continue to accrue from year to year, with payment in lieu in the event of a termination of employment situation.

I have also considered the Organisation of Working Time Act 1997 (the “1997 Act”) in the context of the complainant’s statutory leave entitlements and having regard to the provision in the definition of “wages” in the 1991 Act for holiday pay payable under the contract of employment “or otherwise”.  However, given that there is a parallel complaint before me under the 1997 Act, I consider it appropriate to address statutory leave entitlements under that specific complaint type.

A complaint relating to expenses for 2024 was not pursued before me as the respondent conceded this aspect of the complaint at the outset of the hearing.

For the reasons set out above, I find that the complaint under the 1991 Act is not well founded.

Organisation of Working Time Act 1997

It was submitted on behalf of the complainant that where the complainant did not have an opportunity to take leave during employment, the untaken annual leave accrued as an allowance payable on any termination of employment.  Reliance was placed on European caselaw, and it was submitted that the WRC case of Ryszard Kulbaka v Drumlonan Pork Limited (ADJ-00029622) should be followed.

The respondent’s representative distinguished the case law relied upon by the complainant on their facts.  It submitted that significant differentiating features of the present case were the written contract of employment between the parties providing for the taking of annual leave within a leave period and the complainant having held a senior position in the respondent organisation.  It was submitted that the contractual terms between the complainant and respondent displace the concept of an allowance payable on termination.

The issue is whether untaken annual leave accrued and became payable as an allowance in lieu upon termination of employment under the Organisation of Working Time Act 1997 (the “1997 Act”).  Given the statutory timeframe for referral of complaints under the 1997 Act, the complainant’s untaken statutory annual leave from 2019 can only be addressed in the manner contended for by the complainant, namely by way of an allowance payable on termination of the complainant’s employment on 5 July 2024.

Section 23 of the 1997 Act concerns payment for untaken annual leave in a termination of employment situation and provides, in relevant part, as follows:-

“(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.”

Section 23(1)(b) of the 1997 Act defines the ‘relevant period’ for the purpose of section 23(1)(a)(ii), which period is dependent on the applicable grant of leave provision in section 20(1)(c) of the 1997 Act.

For completeness, the text of section 20(1) and section 23(1)(b) of the 1997 Act is set out in full.

Section 23(1)(b) provides:-

“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.”

Section 20 of the 1997 Act provides:-

“(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 take all or 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.”

The 1997 Act implemented Directive 93/104/EC concerning certain aspects of the organisation of working time.  Article 7(2) of that Directive was transposed into Irish law by section 23 of the 1997 Act.  The Article 7 rights in Directive 93/104/EC were replicated in identical terms in Article 7 of Directive 2003/88/EC, which latter mentioned Directive repealed and consolidated the former. 

It follows from the foregoing that the relevant provisions of the 1997 Act must be interpreted and applied in so far as possible in conformity with European law.  

The guarantee of the right to paid annual leave as a fundamental right through Article 31(2) of the Charter on Fundamental Rights of the European Union (the “Charter) is also relevant. 

As regards the nature of the Charter right, it is worth noting the following extract from the CJEU’s judgment in Max-Planck-gestelleschaft zur Fordertung der Wissenschaften eV v Shimizu (C-684/16):-

“The right to a period of paid annual leave, affirmed for every worker by Article 31(2) of the Charter, is thus, as regards its very existence, both mandatory and unconditional in nature, the unconditional nature not needing to be given concrete expression by the provision of European or national law, which are only required to specify the exact duration of annual leave and, where appropriate, certain conditions for the exercise of that right.  It follows that that provision is sufficient in itself to confer on workers a right that they may actually rely on in disputes between them and their employer in a field covered by EU law and therefore falling within the scope of the Charter …”

The CJEU in Max-Planck recalled the principle deriving from Article 7 of Directive 2003/88 and Article 31(2) of the Charter that the right to paid annual leave acquired cannot be lost at the end of the leave year and/or of a carry-over period fixed by national law when the worker has been unable to take the relevant leave.

CJEU jurisprudence establishes the right to an allowance in lieu of untaken annual leave where the employment relationship terminates as an essential component of the right to paid annual leave under both the Directive and the Charter.

Specifically in relation to the right to an allowance in lieu where the employment relationship terminates, the CJEU in BU v Comune di Copertino (C-218/22), acknowledging the above-mentioned principle and the objective of the restriction in Article 7(2) on the payment of an allowance in lieu, stated that the Directive cannot “as a matter of principle, prohibit a national provision which provides that, at the end of such a period, the days of paid annual leave not taken may no longer be replaced by an allowance in lieu, including where the employment relationship is subsequently terminated, provided that the worker has had the opportunity to exercise the right conferred on him by that directive.”

The respondent has sought to distinguish the present case by reference to a provision in the contract of employment which states that annual leave “should be taken” within the relevant leave period of January to December.   I accept the complainant’s interpretation of the contract of employment, namely that whilst it was envisaged that leave would be taken in the relevant leave year, it was not compulsory to do so.   The complainant’s uncontested evidence was of being unable to take annual leave due to the demands of the respondent’s business and of engagement with his line manager regarding the carryover of leave not taken.  In my view, this evidence corresponds with the terms of the written contract of employment. 

There was no evidence before me of leave being granted to the complainant on a use it or lose it basis, nor of the complainant having been encouraged to avail of the paid annual leave within a certain period or informed that if he did not do so, it would be lost.  I understand that it was in or around the termination of the complainant’s employment that the complainant was informed he would not be paid for untaken leave from previous years.

In circumstances where the respondent has not shown that it exercised all due diligence to enable the complainant avail of the leave to which he was entitled, I am satisfied that a submission contending for the loss of the right to such leave by reference to the employment contract and the corresponding absence of an allowance in lieu payment on termination fails to have regard to Article 7 of Directive 2003/88/EC and Article 31(2) of the Charter. 

The combined effect of sections 19 and 20 of the 1997 Act is, in general terms, to provide a means for determining the minimum paid annual leave entitlement in a leave year and how the leave entitlement should be granted and paid.  Section 20(1)(c) prescribes the timeframe, and related conditions, within which the leave entitlement must be granted to an employee.  I note in particular that section 20 refers to grant of the leave and that the 1997 Act does not expressly provide for loss of an acquired right to paid leave at the end of the timeframes set out in section 20(1)(c) of the 1997 Act.  

Giving effect to the Charter right, I find that the complainant did not lose the right to paid annual leave at the end of the reference period, as contended for by the respondent, but that the right carried over and was extant at the time the complainant resigned from employment.

In the circumstances, I am satisfied that it is permissible and appropriate to interpret section 23 and the ‘relevant period’ provided for in section 23(1)(b)(i) in a manner that is compatible and conforms with European law.

I find that the complainant’s untaken statutory paid leave entitlement accrued and remained to be granted in the 2024/2025 leave year and that, in such circumstances, compensation for the loss of same ought to have been paid on termination of the complainant’s employment in July 2024.

Having regard to the complainant’s statutory leave entitlement and the fact that his contractual entitlement was greater, it is appropriate to apportion the 40 days accrued in untaken annual leave according to the source of the leave to determine the number of untaken days for the purpose of calculating the compensation or allowance in lieu amount under section 23 of the 1997 Act.  On apportionment and based on the agreed daily rate in each of the relevant years, I calculate the statutory accrued untaken leave as 36.35 days and compensation in respect of same on cesser of employment to amount to €9,741.96.

Accordingly, my decision is that the complaint of a contravention of section 23 of the 1997 Act is well founded and that the respondent is required to pay to the complainant compensation in the sum of €10,500.00, which sum reflects the value of the compensation on cesser of employment and breach of the statutory right, and which I consider just and equitable having regard to all of the circumstances.  

CA-00068277-001

For the reasons set out above, my decision is that the complaint referred under section 6 of the Payment of Wages Act 1991 is not well founded.

CA-00068277-002

For the reasons set out above, in accordance with section 27 of the Organisation of Working Time Act 1997, my decision is that the complaint of a contravention of section 23 of the 1997 Act is well founded, and I require the respondent pay compensation to the complainant in the sum of €10,500.00.

Payment of Wages Act 1991 – Allowance on termination of employment – Properly payable - Organisation of Working Time Act – Compensation on cesser of employment – Untaken annual leave – Accrual – Working Time Directive – Charter of Fundamental Rights