Court of Justice of the European Union, Grand Chamber, KHS AG v. Winfried Schulte, 22 November 2011, Case No. C‑214/10
Court of Justice of the European Union
Holidays with pay
Use of international law as a guide for interpreting European Union law
Whether national law could set temporal limits on the accumulation of unused entitlements to paid annual leave acquired during a period of unfitness for work/ Use of international law as a guide for interpreting European Union law
The claimant was a locksmith employed by a German company, who was covered by a collective agreement which provided an entitlement to 30 days’ paid annual leave per year of service. The collective agreement also included a term providing for payment in lieu of unused paid annual leave on termination of employment. Furthermore, the collective agreement included a term stating that an employee’s entitlement to accrued but unused annual leave (that had not been taken by the employee because of illness) was annulled on the expiry of a carry-over period of 15 months after the end of the leave year (reference period), which was a calendar year.
The claimant suffered a heart attack in 2002. Until his employment was terminated in 2008, the claimant was deemed unfit for work and was paid an invalidity pension. In 2009, the claimant issued proceedings against his employer in the German courts for payment of accrued but unused annual leave not taken in 2006, 2007 and 2008, during which time he was unable to take annual leave due to his invalidity.
On appeal, the Landesarbeitsgericht Hamm determined that under the German law and the collective agreement, the claimant was not entitled to be paid for leave that he had accrued in 2006. This leave had been annulled due to the expiry of the carry-over period.
The German court subsequently applied to the Court of Justice of the European Union (“CJEU”) for guidance on whether its national law was compatible with the European Union Working Time Directive (Directive 2033/88) 2.
To determine whether the national law was compatible with the Working Time Directive, the CJEU referred to ILO convention No.132. It observed its case law had established an inviolable right to annual leave even in cases of long-term illness but the accumulation, without any limitation in time, of entitlements to leave or allowances in lieu would no longer reflect the actual purpose of the right to paid annual leave. As for the limitation of the carry-over period to 15 months, on expiry of which the leave entitlement of the employee is lost, the CJEU observed:
“It should also be noted in that regard that, under Article 9(1) of Convention No 132 of the International Labour Organisation of 24 June 1970 concerning Annual Holidays with Pay (revised), the uninterrupted part of the annual holiday with pay must be granted and taken no later than one year, and the remainder of the annual holiday with pay no later than 18 months, from the end of the year in respect of which the holiday entitlement has arisen. That rule may be construed as being based on the consideration that when the periods for which it provides expire the purpose of the leave entitlement may no longer be fully achieved.
Therefore, in view of the fact that, according to recital 6 in its preamble, Directive 2003/88 took into account the principles of the International Labour Organisation with regard to the organisation of working time, calculation of the carry-over period should take into consideration the purpose of the right to annual leave as resulting from Article 9(1) of that convention.
In the light of the foregoing it may reasonably be considered that a period of 15 months for carrying over the right to paid annual leave, such as the period at issue in the main proceedings, is not contrary to the purpose of that right, in that it ensures that the latter retains its positive effect for the worker as a rest period.”3
Accordingly, having referred to ILO Convention No. 132 to interpret the EU Directive, the CJEU determined the limitation of the carry-over period to 15 months was sufficient and thus ultimately capable of enabling the employee actually to exercise his right to annual leave.
1 ILO Convention (Revised), 1970 (No. 132) (ratified by Germany on 01/10/1975).