EELC Law Review 2019: Annual leave

By: Jan-Pieter Vos (Erasmus School of Law) and Prof. Luca Ratti (University of Luxembourg)

Introduction

Last year, our review featured a number of very significant judgments of the ECJ. In particular, the judgments Bauer (C-569/16) and Max-Planck (C-684/16) were so important to be considered amongst the most innovative of the last decade in the jurisprudence of the Court. Also, Dicu (C-12/17) and Hein (C-385/17) were judgments that gained some attention. EELC’s case reports in 2019 saw these judgments in action.

Follow-up of Max-Planck and Kreuziger

In these judgments of 6 November 2018, the ECJ held that Article 7 of Directive 2003/88 and Article 31(2) of the Charter preclude that untaken leave lapses, without the employer having requested the employee to take it, formally if necessary. The employer must also inform the employee, clearly and timely, that the untaken leave may lapse if the employee does not take their leave. Even more importantly, the ECJ awarded horizontal direct effect to Article 31(2) of the Charter, meaning that it can directly apply in disputes between private individuals.

EELC featured a Latvian case report in which the Supreme Court applied the Max-Planck and Kreuziger judgments (EELC 2019/22). The case concerned an employment contract which was terminated by mutual agreement. Despite a statutory obligation to pay for all untaken leave, it appears that the Latvian Supreme Court nevertheless considered it possible that untaken leave waives, provided that the employer meets the requirements set out in Max-Planck and Kreuziger.

These ECJ judgments also forced the German Federal Labour Court to change its case law on the lapse of the entitlements to paid annual leave. In EELC 2019/49, the various technicalities involved were discussed. The Court held that it was possible to interpret the applicable BUrlG (Bundesurlaubsgesetz) in conformity with Directive 2003/88, so that horizontal application of the Charter would not be necessary. Moreover, the Federal Labour Court stressed that the ECJ’s decision had an ex tunc effect, implying that the employer could not be granted protection of its legitimate expectations.

The comments from other jurisdictions to these cases suggest that the discussion on the right to paid annual leave is highly topical at this moment. Indeed, while preparing this review, a Dutch judgment was delivered (ECLI:NL:GHDHA:2019:3444) in which The Hague Court of Appeal interpreted the Dutch legislation in conformity with the Directive as well.

Concurrent Directives

Directive 2003/88 is usually interpreted very broadly. Many situations come within its scope, and the right to paid leave seems virtually carved in stone. However, some situations are an exception to this rule.

EELC 2019/34 concerned a German case – again – discussing whether the employer had rightly reduced the employee’s rights of annual leave as she had enjoyed parental leave for a long time. The Higher Labour Court of Berlin-Brandenburg held the pro rata reduction as lawful. Interestingly, the ECJ delivered the Dicu judgment shortly after, but the Higher Labour Court had been able to use the Advocate General’s Opinion as well as the Heiman and Toltschin judgments (C-229/11 and C-230/11) which allowed application of the pro rata temporis principle. While the approach of the Higher Labour Court appears logical, many comments from other jurisdictions suggested that other countries have delivered a different approach.

Sometimes an appeal gives a whole new angle to a case and completely overturns it. This certainly can be said about the Romanian case, which featured in EELC 2019/36. What seemed to be a case in which the Tribunal had held that a group of professional foster parents were entitled to payment in lieu for untaken leave (such in line with Kreuziger and Max-Planck), turned into a disaster for those claimants. The Court of Appeal of Craiova denied that the Romanian implementation legislation of Directive 2003/88 applied to the situation of professional foster parents. It referred to the ECJ’s judgment in Sindicatul Familia Constanţa and Others (C-147/17), in which the Court held that work performed by a foster parent under an employment contract with a public authority, which consists in taking in a child, integrating that child into his or her household and ensuring, on a continuous basis, the harmonious upbringing and education of that child, does not come within the scope of Directive 2003/88.

Interestingly, the foster parents would work for consecutive fixed-term contracts and tried to obtain a payment in lieu for the contracts that had expired. Even if this were possible under Romanian law, we are not sure whether the ECJ would agree. Although Article 7(2) of the Directive makes it possible that annual leave is exchanged for a payment in lieu after the end of an employment relationship, it remains to be seen whether the ECJ would accept that the employment relation be terminated each year. It wouldn’t be strange at all if the ECJ would see all consecutive contracts as one employment relationship. After all, the ECJ has held that the significance of annual leave for a worker’s health and safety remains if a rest period is taken later (FNV, C-124/05, paragraph 30).

In a way, the Slovenian case featured in EELC 2019/23 seems similar. Ultimately, the Supreme Court held that an employee was entitled to compensation for untaken leave following a dismissal, which had later been considered as unjustified. While the High Court had held that the employment contract had never ceased – implying that the leave couldn’t be bought off in between – according to the Supreme Court this had been the case. Again, we wouldn’t be sure whether the ECJ would accept that.

From those described cases alone, it turns out that the ECJ’s broad interpretation of Article 7 of Directive 2003/88 can lead to many problems in various Member States. While they are usually successful in being able to escape with interpretation in conformity with the Directive, this often means that the burden is on private parties. Given the financial interests that can be at stake, it is not always easy to figure out a practicable solution. For example, EELC 2019/35 discussed two Dutch cases between an employer bound by a collective agreement and two employees. A previous version of the collective agreement had unjustifiably excluded unsocial hours allowances from holiday pay. The parties to the collective agreement had hoped to have this compensated by a later agreement, which provided for an additional salary increase. Nevertheless, claims were still made, one was granted and the other was denied. Repairing a past mistake thus turned out to be difficult.

Limits of the Directive

In terms of ECJ case law, the AKT and TSN judgments (C-609/17 and C-610/17) have some significant value. In the first place, the ECJ confirmed that both Article 7 of Directive 2003/88 and Article 31(2) of the Charter only apply to the four weeks of annual leave which are granted. Member States are free to determine whether or not to grant additional rights of leave. In the wording of the case, the fact of granting workers days of paid annual leave which exceed the minimum period is not, as such, “capable of affecting or limiting the minimum protection thus guaranteed to those workers under that provision (…); nor is it capable of infringing other provisions of that directive, or adversely affecting its coherence or the objectives pursued thereby”.Although the outcome isn’t surprising in view of the ECJ’s earlier judgments in Neidel (C-337/10), Dominguez (C-282/10) and Hein (C-385/17), it is important to have this confirmed once and for all.

Furthermore, the ECJ held that Article 31(2) of the Charter, read in conjunction with Article 51(1) thereof, must be interpreted as meaning that it is not intended to apply where national rules or collective agreements granting more than four weeks of leave exist. While this may be understandable focusing on the right to annual leave, this judgment seems more significant for the broader issue of the effect of EU law on domestic law of its Member States.

Conclusion

While 2019 did not feature as many cases as 2018, the relevance of the right to annual paid leave seems to never fade. The number of case reports and comments thereon alone suggests that Member States find it difficult to transpose Article 7 of the Directive into legislation that stands the test of time. Consequently, we are confident that we will bring you another update next year!