Holidays carried forward

The Luxembourg-based Court of the European Union has recently pronounced itself on the rights of employees to carry forward accrued holidays.

By right employees are entitled to a minimum of four weeks’ paid annual leave under the EU Working Time Directive. Maltese law is more generous and provides that workers are entitled to a minimum of four weeks and four working days of paid holiday in each year calculated on the basis of a 40-hour working week, and an eight-hour working day.

Rulings of the Court of Justice of the European Union (the CJEU) over the last few years have steered and made headway in the areas of holiday entitlement and sickness absence. It is established now that workers on sick leave continue to accrue holiday entitlement while off sick, and that workers are entitled to carry over any accrued but untaken holiday to the next leave year if they have been prevented from taking it due to sickness absence.

A recent reference from Germany to the CJEU sought further guidance on other matters that remain in question. What has not been clear so far is whether the entitlement to carry holiday forward to subsequent years is limited in time in any way and whether it covers just a worker’s minimum entitlement under European law or extends to any additional holidays granted by national law. A recent case has helped to provide some clarity on these issues.

A preliminary reference evolved from judicial proceedings instituted by Georg Neidel, a fire-fighter based in Germany, who having retired after a long period of sickness absence, brought a holiday pay claim for accrued and untaken statutory leave. His request for payment in lieu of untaken leave was initially rejected by a decision of the Stadt Frankfurt am Main on the ground that German civil and public service law makes no provision for financial compensation for leave not taken. On appeal, the German administrative court referred certain aspects to the CJEU.

In its ruling, the Court of Justice confirmed that an employee is entitled on termination of employement to payment in lieu of statutory leave not availed of due to sickness. Sick workers, however, are entitled to carry forward untaken leave only up to the four-week minimum leave entitlement given by the Working Time Directive.

If member states choose to give workers more generous leave entitlements, longer than the statutory holiday period specified in the directive, they can still limit payment in lieu to the period of four weeks without extending it to the extra leave. In the latter case, national laws need not guarantee workers payment in lieu of untaken holidays, upon termination of employment, over and above that minimum four week period. It is therefore up to the member states to decide whether to extend the carry-over right to the leave entitlement beyond that specified by the directive, or else adopt a “use it or lose it” approach.

The Court of Justice also held that insofar as the German law in contestation imposed a timebar of nine months following the end of the leave year for the employee to use carried-over holiday entitlement, it was not in line with the directive. Although the court allowed member states to provide for a time limit for carried over untaken leave to expire within an established period, the window of opportunity available for employees to use up such carried over leave could not be short.

It held, in line with previous caselaw, that a worker absent on sick leave must be entitled to carry over untaken statutory holiday for a time period substantially longer than the relevant reference period itself. No definite answer was given on how long this period should be; based on this and previous rulings, definitely such period would need to exceed 12 months to be compliant with the directive.

Although the position is still not as clear as day, behind this ruling there is some potentially good news for employers regarding how much and for how long workers’ leave can be carried forward if untaken due to sickness.

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Dr Grech is an associate with Guido de Marco & Associates and heads its European law division.