ECJ Holiday Pay Decision

The ECJ has, this morning (Thurs), handed down its decision in Federatie Nederlandse Vakbeweging v Staat der Nederlanden.

It is authority for the proposition that:

• the ECJ TUPE case of Henke v Gemeide Schierke and Verwaltuingsgemeinschaft Brocken remains the most unpronounceable case name out there, but only just (do feel free to challenge me on this!); and,
• more importantly, it is unlawful for EU states to allow employers to replace the minimum four weeks' paid holiday with pay in lieu, even when the holiday year has expired and the holiday allowance carries over into the following year.
  

Under the Netherlands' civil code, employers must provide four weeks' paid holiday leave each year. However, if the employee does not take the holiday, employers are permitted to roll it over into the next year and pay compensation in lieu (provided they allow the employee to have their full four week entitlement in that, subsequent, year).

The ECJ has ruled that this practice is contrary to Article 7(2) of the Working Time Directive, which requires Member States to ensure that every worker is allowed four weeks' paid annual leave, and that this annual leave may not be replaced by a payment in lieu (except after termination of employment).

The ECJ's reasoning is, essentially, that permitting pay in lieu for untaken holiday entitlement in subsequent years might provide an incentive for employees, incompatible with the objectives of the Directive, not to take their full leave entitlement (which is an important health & safety measure) during the year.

Federatie Nederlandse Vakbeweging v Staat der Nederlanden