Hi We are running exchange 2003 and outlook 2010

We have a Public folder mail enabled and send as right passed to two people

When they email via send as they do not get out of office messages returned to the folder (internal mail)

If they turn on out of office on their own account sand send as the public folder then they do get a message back.

Is this by design?

You have posted in an Exchange 2013 forum.  The Exchange previous versions forums are here:  http://social.technet.microsoft.com/Forums/en-US/category/exchangeserverlegacy

I've never heard of that behavior, so I can't comment.  But 2003 is a very old version and no longer supported, so you may have a hard time finding out the answer.