This ought not to come as too much of a surprise to a UK audience where the right to payment in lieu of accrued holiday on termination is unqualified. The judgment, however, highlights a number of significant points.
Mr Kreuziger was a paid legal trainee with Land of Berlin. During the last few months of his employment he did not take any annual leave. When his traineeship ended, he requested an allowance in lieu of the leave he had not taken. The request was refused on a number of grounds set out within German national law. Mr Kreuziger brought a claim. The Higher Administrative Court Berlin-Brandenburg made a reference to the ECJ to give a ruling on whether the right to an allowance in lieu of paid annual leave could be precluded where the worker failed to take leave despite being in a position to do so.
In Mr Shimizu's case, as he was employed by a private employer, the question as to whether the Working Time Directive ("WTD") could be enforced directly by him against his employer was also raised.
DecisionThe ECJ stated that it would not be compliant with the WTD for national law to prescribe an automatic loss of an allowance in lieu of paid annual leave on termination, or (more interestingly from the UK perspective) at the end of a holiday year, on the basis that the worker had failed to seek to take leave.
Untaken annual leave, says the ECJ, will carry over to the next holiday year, unless the employer can establish that it has encouraged the worker to take the leave and informed him, accurately and in good time, of the risk of losing that leave; if the employment terminates and the employer cannot establish this, the right to payment in lieu is to take into account the total accrued, untaken entitlement.
Furthermore, the ECJ decision confirmed that the WTD could be directly enforced against private sector employers. Therefore, if the Working Time Regulations 1998 are considered incompatible with EU law, the UK courts would be obliged to disapply the offending provision.
Given the view of the ECJ, employers should consider sending out reminders to employees about annual leave entitlement and inform the worker that the leave will be lost if it is not taken.
Employers should ensure that the workers are given the opportunity to take their paid annual leave entitlement and consider taking proactive steps to encourage them to do so. A record of any communications with workers regarding annual leave should be kept.
Authored by Sam Ponzini and Tim Scott.