Rest or relaxation?

Workers have the right to accumulate annual leave under the working time directive when they are off sick, but can they carry it over from one year to the next? In KHS AG v Schulte, the Court of Justice of the European Union (CJEU) said that workers on sick leave cannot endlessly accumulate entitlement, as the leave would cease to be a period of rest in those circumstances and instead become a period of “relaxation and leisure”.

Basic facts

Mr Schulte, who had worked for the company for many years, was entitled under the terms of a collective agreement to 30 days paid annual leave.

In January 2002, he had a heart attack and was declared unfit for work. He received a pension from October 2003 until the end of August 2008 on the ground of total invalidity, when the company terminated his employment.

He then brought a claim in a German labour court for payment in lieu of the annual leave he had not taken during 2006, 2007 and 2008.

Relevant law

Article 7(1) of the working time directive states that member states shall ensure that every worker is entitled to paid annual leave of at least four weeks.

Paragraph 11 of the relevant German collective agreement states that leave entitlement lapses three months after the end of the calendar year unless the worker cannot take it because of illness, in which case it lapses after 12 months .

Decision of German labour court

The German court upheld his claim but only in relation to the statutory holiday that he had accrued under European law, plus five days to which he was entitled under German law because of his disability.

He appealed to the Higher Labour Court which said that, under national legislation and the collective agreement, his entitlement to paid annual leave for 2007 and 2008 still existed when his contract of employment ended. However, he lost his entitlement for 2006 because the carry over period of 15 months stipulated in the collective agreement had expired..

It asked the CJEU to decide whether article 7(1) allowed for entitlement to holiday leave to lapse at the end of the leave year and / or at the end of a carry over period. If so whether the period for which leave could be carried over should be for at least 18 months.

CJEU decision

The CJEU said that in the case of a worker who is off sick, national legislation cannot provide that their right to paid annual leave will lapse without actually having had an opportunity to take that holiday.

Any carry-over period must take into account the specific circumstances of a worker who is unfit for work for several periods and so should be “staggered, planned in advance and available in the longer term. Any carry-over period must be substantially longer than the reference period in respect of which it is granted”.

However, that right must be qualified in the case of a worker who is off sick otherwise they would continue to accumulate unlimited holiday entitlement.

The CJEU therefore concluded that workers cannot endlessly accumulate entitlement to paid annual leave while they are off sick, not least because “it ceases to have its positive effect for the worker as a rest period and is merely a period of relaxation and leisure”, which is not the point of article 7.

In this case, it held that a carry-over period of 15 months was not contrary to the purpose of the right to paid annual leave, as it ensured that the leave period retained its positive effect as a rest period.