Under the European Working Time Directive, workers are entitled to a minimum of four weeks’ paid leave every year. In Heimann and Toltschin v Kaiser GmbH, the Court of Justice of the European Union (CJEU) said that the situation of workers on short-time contracts was comparable to that of part-time workers and paid annual leave should therefore be reduced proportionally to the reduction in working time.
Mr Heimann and Mr Toltschin worked for Kaiser, a sub-contracting business in the motor industry employing several hundred employees. In 2009, owing to financial difficulties, the company decided to reduce its staff numbers and dismissed Mr Heimann and Mr Toltschin on 30 June and 31 August 2009, respectively.
However, after coming to an agreement as part of a social plan with its works council, the men’s contracts were extended for exactly one year on a ‘zero hours short-time working’ contract.
Although the men were not obliged to work and Kaiser was not obliged to pay them a salary, it meant they were entitled to an allowance from the Federal Employment Agency which the employer paid and which replaced their salary for the duration of the short-term contract.
When the contracts came to an end, the two men claimed compensation for annual leave not taken in 2009 and 2010. Kaiser claimed that, during the period of ‘zero hours short-time working’, they did not acquire any rights to paid annual leave.
Decisions of lower courts
The German court, the Abereitsgericht Passau, asked the CJEU to decide whether the “pro rata temporis” rule (under which workers only accrue paid annual leave for the time they actually work) was compatible with European law.
Decision of CJEU
The CJEU noted that the entitlement to paid annual leave was a particularly important principle of European Union social law, which member states could not interpret restrictively.
It also pointed out that EU law precluded national legislation or practices that did not provide an allowance in lieu of paid annual leave to a worker off sick for the whole or part of the leave year, on termination of the employment relationship.
However, it then went on to say that the situation of a worker on short-time working was “fundamentally different” to that of a worker unable to work as a result of an illness.
First of all, short-time working was part of an agreement between the employer and the employees’ representatives, which allowed for “the suspension ... of the reciprocal obligations of the employee and the employer as regards work and salary”. Secondly, workers on short time were free to do what they liked with their spare time, unlike workers on sick leave.
Finally, it said that if employers had to pay annual leave during the period of short-time working, they would be much less likely to agree to a social plan under which the contract of employment was extended for purely social reasons, in the interests of the worker.
However, although their situation was different to someone on sick leave, the CJEU said it was comparable to that of a part-time worker and paid annual leave should therefore be reduced proportionally to the reduction in working time.
The CJEU has confirmed the entitlement of all workers to paid annual leave. Mr Heimann and Mr Toltschin were on zero hours contracts so that if they did not work, they were not paid. The CJEU said that such a working situation was comparable to that of a part-time worker, rather than a worker who is unable to work by reason of ill health, and so the annual leave entitlement must be calculated pro rata the time worked over the leave year or reference period.