The Court of Justice of the European Union (CJEU) has held in Max-Planck-Gesellschaft.v Shimizu that in relation to EU holiday (the first four weeks each year), unless the employer can show that they gave the worker every opportunity to take the annual leave and the worker deliberately chose not to take it in the year it accrued, they retain their entitlement even if they fail to apply for the leave before the employment relationship comes to an end.
About two months before Mr Shimizu’s employment with Max-Planck Gesellschaft was due to end, his employer asked him to take his remaining leave on a number of different dates that it had specified although it did not force him to take the outstanding leave on those dates.
After taking only two days off, Mr Shimizu asked Max-Planck about a week before his employment ended to pay him almost 12,000 euros corresponding to 51 days’ paid annual leave for 2012 and 2013 which he had not taken.
When his employer refused, he lodged a claim with the German labour court. After his claim was upheld at first instance and on appeal, Max-Planck appealed to the Federal Labour Court.
That court stated that as German law does not allow for holiday to be carried over from one year to the next, Mr Shimizu was not entitled to an allowance in lieu of the holiday he had not taken in previous leave years. It then asked the CJEU to decide whether this provision was consistent with Article 7 of the Working Time Directive.
Article 7(1) states that “Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice”.
Article 7(2) states that “The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated”.
Decision of CJEU
Noting that workers are always the weaker party in the employment relationship, the Court held that they do not automatically lose the right to paid annual leave under EU law (and therefore the right to an “allowance in lieu”) just because they did not apply to take the leave until after the relationship had ended.
Those rights would only lapse if the employer could prove they had given the worker every opportunity to take the leave days at issue well in advance of the leave year ending. It followed that if the employer could prove that they had done so and the worker had deliberately not taken advantage of the opportunity to take the outstanding leave, then they could, in those circumstances, lose the right to take it or their entitlement to the allowance in lieu, if the relationship had already ended.
The Court also made clear that these principles apply to both public and private employers (and therefore included Max-Planck) as the right to annual leave is provided for within the EU Charter of the Fundamental Social Rights of Workers as well as the Working Time Directive.
This is a very important case in the ever-evolving area of holiday pay. Previously it was thought that EU leave (the first four weeks each year) was lost if not taken in the year it accrued, unless the worker was sick and then they can carry leave forward for 18 months. This case established that it will only be lost if an employer can show they exercised all due diligence to enable the leave to be taken and the worker deliberately chose not to take the leave.