An employee remains entitled to an allowance by way of compensation for any days of annual leave not taken in the course of his employment even when the said employee himself decides to retire from the job, the Court of Justice of the European Union (CJEU) has recently confirmed. This is the case if prior to such retirement he/she could not make use of such leave due to illness.
The EU’s Working Time directive provides that all member states must ensure that their national legislation caters for the right of every worker to paid annual leave of at least four weeks. Such paid annual leave may be replaced by an allowance in lieu where the employment relationship is terminated.
An Austrian civil servant retired from his job, at his own request, with effect from July 1, 2012. He was on sick leave for the period between November 15, 2010, to December 31, 2010. From January 1, 2011, up till the date of his retirement, upon agreement with his employer, he did not report to work while continuing to receive his salary.
Upon retirement, the employee requested his employer to pay him an allowance in lieu of paid annual leave not taken. He alleged that he had fallen ill once again shortly before he retired and hence could not utilise his leave even during that period. The employer refused his request on the grounds that, according to the employment rules regulating the remuneration of civil servants in Vienna, a worker who voluntarily terminates the employment relationship, particularly because he applies for retirement, is not entitled to such an allowance. The Viennese Administrative Court seized of the case filed a preliminary reference before the CJEU requesting guidance as to whether such national rules are compatible with EU law.
The EU’s working time directive provides that every worker is entitled to paid annual leave of at least four weeks
The CJEU observed that the EU’s working time directive provides that every worker is entitled to paid annual leave of at least four weeks. Such leave must be granted to every worker irrespective of his/her state of health. It noted that EU law endows an employee with the right to an allowance in lieu of unutilised paid annual leave when the employment relationship comes to an end. The law provides for this in order to ascertain that a worker who did not utilise his leave gets to enjoy such right, at least in pecuniary form, upon termination of employment.
In line with previous jurisprudence on the matter, the court asserted that the reason as to why the employment relationship ended was irrelevant. This means that even an employee who applies for retirement is entitled to such an allowance when he could not, because of sickness, use up his right to paid annual leave prior to termination of employment. The Court concluded that, in the case under examination, the employee was entitled to an allowance for the period November 15, 2010, to December 31, 2010, during which he was on sick leave and hence could not use his leave entitlement over that period.
The court observed that the right to annual leave has a twofold objective: that of enabling the worker to rest from his daily work as well as to enjoy a period of relaxation and leisure. It went on to state that, as a rule, in cases where a worker, as in the case under examination, prior to his retirement, enters into an agreement with his employer to not report to the workplace while continuing to receive his salary, he is not entitled to an allowance in lieu of paid annual leave not taken during this period. He would be entitled to such an allowance only if during the same period he could not, due to sickness, take his leave. In this particular case, the CJEU left in the hands of the national court to determine if this was actually the situation in this particular case.
The objective of the EU’s labour laws is to protect the health and safety of employees at all times by ensuring that there is a balance between the employer’s and employee’s rights at the workplace. By providing guidance to the interpretation of such laws, the Court of Justice of the European Union ensures that such a delicate balance is safeguarded at all times in the course of employment relationships as well as upon their termination.
Mariosa Vella Cardona is a freelance legal consultant specialising in European law, competition law, consumer law and intellectual property law.