An employee retains the right to claim payment for all leave not taken should the employee be impeded from availing themselves of their paid leave entitlement by the employer, the Court of Justice has recently affirmed.

The EU’s Working Time Directive clearly provides that all member states must ensure that their laws make provision for the right of employees to at least four weeks paid annual leave.

The facts of this case were briefly as follows. An employee was engaged by a UK company on the basis of a ‘self-employed commission-only contract’ from 1999 until he retired in 2012. In terms of his contract, the employee was paid on a commission-only basis and he could only take unpaid leave.

Upon termination of his employment relationship, the employee sought to recover payment for any unpaid annual leave that he had taken as well as for that not taken in the course of his employment. The employer rejected the claim made by the employee and the latter in turn filed proceedings before the national Employment Tribunal.

The latter tribunal concluded that the employee was indeed a ‘worker’ in terms of national law transposing the EU’s Working Time Directive and as such he was entitled to payment in lieu of leave. Upon appeal, the appellate court filed a preliminary reference before the CJEU requesting guidance as to whether in terms of EU law an employee must first have taken paid leave before being able to claim his entitlement to be paid for any leave not taken.

Noting that UK law does not allow annual leave to be carried over beyond the leave year for which it is granted, the national court also queried whether national law can prevent an employee from carrying over any leave not taken when the said employee is impeded from taking their leave by the employer and whether such leave can be carried over indefinitely or for a limited period.

The CJEU observed that the right of every worker to paid annual leave is an important principle of EU social law. The purpose of such right is to enable the worker to rest and to enjoy a period of relaxation and leisure, the Court explained.

An employer that does not allow an employee to exercise his right to paid annual leave must bear the consequences

An employee faced with circumstances liable to give rise to uncertainty during the leave period with regard to his remuneration for such leave is not able to fully benefit from such right. In fact, such circumstances are liable to dissuade the worker from taking his annual leave. Any practice or omission of an employer that might have such a deterrent effect is incompatible with the purpose of the right to paid annual leave, the Court affirmed.

The CJEU proceeded to note that EU law precludes a situation in which the worker has to take leave before being allowed to have recourse to the courts in order to claim his right to be paid for any leave not taken.

The CJEU then alluded to previous jurisprudence which clearly established that a worker who has not been able, for reasons beyond his control, to exercise his right to paid annual leave before the termination of the employment relationship is entitled to an allowance in lieu. In these previous cases, the workers concerned had been prevented from exercising their right to paid annual leave due to their absence from work because of an illness. In these cases, the CJEU had ruled that EU law does not preclude national provisions or practices limiting the accumulation of entitlements to paid annual leave by a carry-over period of 15 months at the end of which the right is lost. The raison d’être behind such ruling, the CJEU noted, was to safeguard the employer from the risk that a worker accumulates lengthy periods of absence and hence create difficulties for the employer with regard to the organisation of work.

The CJEU, however, drew a distinction between the facts leading to such a ruling and those of the case under examination. The Court noted that, in the case under examination, the employer was not faced with periods of absence on the part of the employee and hence deserved no protection. On the contrary, the employer benefited from the fact that the employee did not interrupt his professional activity since he could only avail himself of unpaid leave. The CJEU highlighted the fact that it is up to the employer to seek all information regarding his obligations in regard to paid annual leave towards his employees.

The CJEU concluded that, unlike in a situation of accumulation of entitlement to paid annual leave by a worker who was unfit for work due to sickness, an employer that does not allow an employee to exercise his right to paid annual leave must bear the consequences. In all those cases where the employer refused to allow the employee to take paid leave, national law cannot prevent a worker from carrying over and accumulating, until the termination of his employment relationship, paid annual leave rights not exercised in respect of several consecutive reference periods.

In this judgment, the CJEU had made it clear that neither employers nor the law can prevent an employee who was impeded from taking paid annual leave by his employer from being reimbursed for all such leave not taken.

The rights of the employee in such cases reign supreme and this in order to ensure the utmost protection for employees and their right to adequate rest from the workplace.

Mariosa Vella Cardona M’Jur, LL.D., is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.

mariosa@vellacardona.com