A&L Goodbody LLP
  October 7, 2005 - Ireland

Occupational Sick Pay Scheme and Sex Discrimination
  by Karen Killalea

The European Court of Justice has issued an important ruling which could have significant consequences for employers who operate occupational sick pay schemes. In the decision of McKenna v. North Western Health Board (C-191/03) the European Court of Justice (ECJ) was asked whether an occupational sick pay scheme which provided for the reduction in pay and paid sick leave entitlements of both female employees with pregnancy related illnesses and male employees with “normal” illnesses, was discriminatory. The ECJ answered no to this question but this long awaited decision creates uncertainty for Irish employers. The facts Ms. McKenna was employed by the North Western Health Board. In January 2000 she discovered that she was pregnant. For almost the entire duration of her pregnancy, she was on certified sick leave because of a pregnancy related illness. Under her employer’s occupational sick pay scheme she was entitled to 365 days of paid sick leave in a 4 year period with full pay for the first 183 days and the balance at half pay. Ms McKenna received full pay for the first 183 days of her absence and half pay up to the commencement of her maternity leave. During her maternity leave she received full pay in accordance with her employer’s maternity leave policy. After the maternity leave, she continued to be absent due to a pregnancy related illness and her pay was reduced by half. Ms McKenna argued that her employer had discriminated against her on the gender ground because her pregnancy related illness had been treated the same way as a non pregnancy related illness. As a result she suffered unfavourable treatment because her absence due to a pregnancy related illness was offset against her overall sick-leave entitlement. It was also discriminatory, she argued, to reduce her pay in circumstances where the reduction was triggered by a pregnancy related illness. The Equality Officer found in favour of Ms. McKenna but the North West Health Board appealed the ruling to the Labour Court. The Labour Court decided that it could not rule in this case without referring it to the ECJ for clarification on the interpretation of the Equal Pay and Equal Treatment Directives. Was the occupational sick pay scheme discriminatory on the gender ground? The European Court said no, subject to certain qualifications. It looked at the two limbs of the sick pay scheme. First the reduction in pay and second the reduction in the overall paid sick leave entitlement as a result of the “credit” that Ms. McKenna had used up by being on pregnancy related sick leave. In arriving at its decision, the Court looked at the following issues: Can an occupational sick pay scheme provide for a reduction in pay to pregnant employees suffering from a pregnancy related illness? The court said yes. It found that subject to the following conditions, a reduction in pay was not discriminatory where the rule in the scheme providing for the reduction in pay: (i) Applies equally to both a female worker who is absent due to a pregnancy related illness and a male worker who is absent for a “normal” illness; and (ii) the payment is not so low so as to undermine the objective of protecting pregnant workers. The first condition is straightforward. The entitlement to sick pay must be based on conditions which apply equally and without discrimination between employees who are suffering from pregnancy related illnesses and male employees suffering from other pathological illnesses. The second condition however is not so straightforward. There are a host of protections for pregnant workers which have been implemented on foot of European Directives ranging from measures to protect the health and safety of pregnant employees to the protection of employment rights including protection from dismissal. The ECJ has previously acknowledged that a pregnancy related illness which causes incapacity for work is a specific feature of pregnancy and in the same way that pregnant employees are entitled to special protection from dismissal by reason of the fact of pregnancy, employees are also protected from dismissal by reason of such incapacity arising before the expiry of maternity leave. However, the ECJ has stopped short of ruling that this means that a pregnant employee is entitled to full pay either when on maternity leave or when absent due to a pregnancy related illness. In the Gillespie case the ECJ decided that the special protection of pregnant employees can be accommodated without requiring employers to pay female employees in full while on maternity leave. It has now ruled in the McKenna case that the special nature of pregnancy, including the occurrence of pregnancy related illnesses can be accommodated within a sick pay scheme which provides for the reduction of pay but the level of reduction which is acceptable is unclear. How “low” is so low so as to undermine the objective of protecting pregnant workers? What does an employer now have to do to ensure that it does not undermine the objective of protecting pregnant workers? Does this mean that employers are now obliged to pay pregnant employees when they are absent due to illness so as to protect them? The answer is not clear. In the context of deciding what level of pay is adequate for an employee on maternity leave, Article 11(3) of the Directive 92/85 provides that maternity pay is adequate where it “guarantees income at least equivalent to that which the worker concerned would receive in the event of [absence due to illness]”. That creates an anomaly for Irish employers because in Ireland there is no statutory obligation on an employer to pay an employee who is absent due to illness. An employee, provided she has the requisite PRSI contributions can receive State disability benefits. But what happens now where an employee does not have the requisite contributions to obtain State disability benefit? Is it the responsibility of the employer to ensure that the employee receives an adequate allowance which matches what the State would have paid if the employee qualified for benefits? Can an occupational sick pay scheme provide for offsetting absences due to a pregnancy related illness from the total available entitlement to paid sick leave? The Court answered yes. But it cannot have the effect, during any sick absence after maternity leave (which is not pregnancy related) of reducing that employee’s pay below what she would have been entitled to during the illness which arose when she was pregnant. This is a significant condition. The net effect appears to be that any absence due to a pregnancy related illness is in fact ring fenced and cannot deprive the employee down the road of their entitlement to sick pay for “normal” illnesses. It seems that an employer will now have to disregard any period of paid sick leave due to a pregnancy related illness when calculating the employee’s entitlements to sick pay later on. This is only the case however where the employee would otherwise have exhausted her sick pay entitlements by reason of being on that paid leave previously. Conclusion The case will now return to the Labour Court for a decision. However, it is quite clear from the ECJ ruling that although the pay of pregnant employees can be reduced during an absence due to a pregnancy related illness, an employer must have regard to the level of that reduction. Further, the employer now has to bear in mind that the employee’s entitlement to paid sick leave may not in fact be diminished by an absence due to a pregnancy related illness.


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