The decision in the case Schultz-Hoff (judgement dated 20 January 2009 – docket no. C-350/06), with which the ECJ declared that it is not permissible to limit the term of the claim to holiday or payment in lieu of holiday of an employee unable to work on grounds of a long-term illness, created considerable financial risks for enterprises and, not only for this reason, was the subject of serious criticism. As already announced (cf. Newsletter III/2011), the ECJ has now used a further preliminary ruling to correct its case law and give the employer some points of orientation as to when a claim to payment in lieu of holiday validly expires.

According to the factual situation underlying the decision, the claimant had a holiday claim of 30 working days per year pursuant to the standard industry-wide collective agreement [Einheitlicher Manteltarifvertrag, EMTV] applicable to his employment relationship. In January 2002 the claimant had a heart attack, as a result of which he was declared severely disabled and unable to work. From October 2003 onwards he drew a pension on grounds of a full reduction in his earning capacity and ultimately retired from his employment relationship as per 31 August 2008. In March 2009 the claimant claimed compensation of the paid minimum annual holiday for severely disabled of a total of 25 working days for the years 2006, 2007 and 2008. The employer pleaded the collectively agreed maximum period for carrying over holiday claims of 15 months.

Whereas the case was successful in the first instance, the Regional Labour Court [Landesarbeitsgericht, LAG] of Hamm, which handled the appeal, suspended the proceedings and essentially presented the ECJ with the question of whether or not a carry-over period of 18 months is reconcilable with European law (in this case, Directive 2003/88).

The ECJ initially declared such a regulation to be invalid in application of its case law in the matter Schultz-Hoff (judgement dated 20 January 2009 – docket no. C-350/06) and that it does not lead to an expiry of the holiday claim. Nevertheless, it saw cause to "nuance" this case law: the employee's interest in having a period for relaxation and free time must be weighed against the risk of the accumulation of excessively long periods of absenteeism for the employer's work organisation. The employee's protected interest requires that the carry-over period clearly exceeds the duration of the reference period for which the holiday claim is granted. At the same time, however, the carry-over period must also prevent an excessive "hoarding" of holiday claims. In the opinion of the ECJ, a carry-over period of 15 months meets these requirements.

The judgement of the ECJ has provided the long sought after legal clarity. The feared incalculable cost burdens arising from an unlimited retroactive consideration of payment in lieu of holiday for employees with a long-term illness should be excluded in future, insofar as the collective partners ensure as soon as possible that carry-over periods of a term of at least 15 months (in particular in the event that it is impossible for an employee to take holiday on grounds of his illness) are incorporated into the collective agreements.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.