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Barry Walsh explores the liability issues that can arise for employers where practice is inconsistent with policy relating to sick pay. An issue that often troubles some HR practitioners is the extent of employer contractual sick pay liability for absent employees. Another HR concept that frequently arises for debate is whether employer custom and practice can, over time, actually create an enforceable contractual right for employees. These two issues can merge where an e...
Barry Walsh explores the liability issues that can arise for employers where practice is inconsistent with policy relating to sick pay. An issue that often troubles some HR practitioners is the extent of employer contractual sick pay liability for absent employees. Another HR concept that frequently arises for debate is whether employer custom and practice can, over time, actually create an enforceable contractual right for employees. These two issues can merge where an employer has a long term absent employee and an inconsistent historical sick pay practice, particularly so where the employee absence stems from performance management or disciplinary issues.
Custom and practice can overwrite policy
Meaningful legal clarification on these issues can be thin on the ground but the recent High Court case of Elmes v Vedanta Lisheen Mining is a rare example of a superior court ruling on how custom and practice can create such a right. Most employers know that there is no statutory duty to pay employees absent through illness or injury and that it is a matter for contract whether they wish to offer any such benefit. If employers do offer contractual sick pay, best practice dictates that clear written contractual provisions are in place, which are then consistently implemented in practice. Furthermore, employers know that inconsistent treatment of sick pay in individual cases will confuse and undermine the general position and that they should only depart from such policies in exceptionally circumstances and practices and then only for very good reason. In the Vedanta case there were a number of plaintiffs who were manager level employees who went on sick leave following a difficult period where employer investigations occurred as a result of a fatal accident at work. The employees were paid as normal for the first six weeks of absence and sick pay was then suspended. Their High Court action was brought by way of injunction and raised a number of issues including a claimed right to extended contractual sick pay. On the sick pay point the employees claimed that the suspension of sick pay was void, being in breach of contract and natural and constitutional justice. They stated that while there was reference in written work policies to a six week period, the employer never suspended the pay of an employee who had sustained a work related injury or illness after six weeks and that, in fact, discretion was normally exercised in favour of continuing to pay employees unless there was good reason not to do so. In essence the employees claimed that the written provisions had been overwritten in practice and that a right to continuing sick pay had effectively been implied into their contracts by virtue of “established custom and practice”. Vedanta admitted that its practice had, on occasions, been to continue to pay sick pay on humanitarian grounds for work related injuries but overall stated that there was no general pattern on sick pay treatment. The High Court found that there was evidence that in a substantial number of cases contractual sick pay continued for much longer than the six weeks specified in the policy. Ultimately it ruled that the company had, through repeated practice, created an enforceable contractual right and it ordered that the plaintiffs were entitled to sick pay for a six month period with a right to re-apply to Court as the matter further developed.
Disciplinary processes and sick pay implications
It should be noted that this claim was part of a broader dispute involving an injunction application to prevent a disciplinary process from occurring. Stand-alone High Court claims where employees are seeking a contractual sick pay entitlement as the only remedy are rare although statutory claims to a Rights Commissioner are possible under the Payment of Wages Act. The other well-known Irish High Court case is Charlton –v- Aga Khan from 1999 which interestingly also arose in the context of a broader termination of an employment dispute where the Plaintiff was seeking a termination of an employment related injunction as well as an order relating to sick pay. In Charlton, even though no express contractual right could be asserted by her, the High Court ordered that the employee's salary be paid pending the resolution of the matters in dispute and for so long as she remained ill provided that she furnished her employer a weekly illness report. The Court accepted her case that “it has always been the position ...that long-standing employees were paid their salary in full when they were absent through illness and that this custom is part of her terms of employment”
Employers should have clear written policies - and stick to them!
The guidance for employers is, more than ever, to have clear contractual written principals and policies in place and, equally importantly, to operate within them. Departure from clear policies, even in meritorious cases, should be carefully taken and expressed to be an exception to the default rule. The danger for employers is that any more generous treatment if sufficiently repeated to establish a pattern, may ultimately be seen as the standard by which they will be judged. For further information on this issue contact Barry Walsh, Partner and Head of Employment and Benefits. Remember that this article is for information purposes only and does not constitute legal advice. Case law is fact specific and readers should understand that similar outcomes cannot be assumed. Specific advice should always be taken in given situations.