Since the ECJ emphasized in its decision of January 2009 on the
Schultz-Hoff case that the employee's claim to paid annual
leave is an especially important principle of social law, the
German law relating to the annual leave entitlement has
increasingly been penetrated by European law requirements. Besides
the leave entitlement of employees suffering from long-term
illness, on which the decisions in the Schultz-Hoff case and
KHS/Schulte case were based, the Luxembourg-based judges rendered
judgments on the leave entitlement of part-time employees in the
"Tirol" judgment and on the leave entitlement of
short-time employees in the most recent judgment of 8 November 2012
(case nos.: C-229/11 and C-230/11).
Pursuant to the underlying facts of the case, two employees of
an automotive company in Lower Bavaria which had decided to reduce
staff due to financial difficulties filed an action against their
dismissal. The social compensation plan agreed with the works
council provided for the extension of the employment contracts of
the dismissed employees for one year from the date of their
dismissal by applying the so-called "Kurzarbeit Null"
[zero hours short-time working] to give the employees concerned by
the dismissals the opportunity of drawing short-time allowance from
the Federal Employment Agency. During the "Kurzarbeit
Null" the principal obligations arising from the employment
contract, i.e. the employee's obligation to work and the
employer's obligation to pay the wages and salaries, are
temporarily suspended. After the termination of their employment
contracts, both employees filed an action for compensation of leave
entitlements for the period of the "Kurzarbeit Null".
The Labor Court of Passau seized with the case then referred the
case to the ECJ submitting the question as to whether the
Union's law is precluding national legislation or practice
according to which the entitlement to paid annual leave is reduced
in proportion to the reduced working hours on the grounds of
short-time working. The ECJ denied this question and considered
that such a reduction of the paid leave was in conformity with
European law. It pointed out that the employer would be liable to
be reluctant to agree to such a social compensation plan which was
aimed at relieving the employees concerned by the dismissal if he
was obliged at its conclusion to pay for a paid annual leave based
on the full-time working hours during the period of short-time
working. In addition, it stated, the employee was free to rest or
to devote himself to recreational or leisure activities during the
period of short-time working. Accordingly, the ECJ considered that
the situation of short-time employees could not be compared to the
situation of the incapacity for work due to illness.
The present judgment by the ECJ grants relief to the employer
within the scope of short-time working, a key instrument in phases
of economic recession. If an employer decides to carry out the
"Kurzarbeit Null" this also opens up the opportunity to
proportionally reduce the leave entitlement of the employees
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.
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