KHS AG v Schulte ECJ, 22.11.11 (C-214/10)

The ECJ has held that placing a limit of 15 months on the period during which an employee can accrue and carry over annual leave was compatible with the EU Working Time Directive ("WTD"), even where the effect was to deprive an employee of the opportunity to take such leave due to long term sickness absence.

The ECJ's view was that the principle established in Stringer/Schultz-Hoff, that annual leave should not be lost when an employee is on long term sick leave, must be qualified so as to avoid workers accumulating paid annual leave for an unlimited period while on sick leave.

It is worthy of note that, unlike in Stringer/Schultz-Hoff, the carry-over period of 15 months in this case was longer than the leave year it related to. The ECJ held that the carry-over period of 15 months was sufficient to ensure that annual leave retained its positive effect as a rest period.

Implications

This decision confirms that the WTD does not preclude national provisions, such as collective agreements, that limit the accumulation of paid annual leave during long-term sickness absence by a carry-over period of 15 months or more.

This suggests that UK employers would be entitled to introduce a carry-over restriction without being in breach of the WTD. The time limit imposed needs to be considered and must not impact on the right to take leave during the relevant reference period. However, there is some divergence between European and UK case law in this area, and it remains to be seen how the UK courts will interpret the domestic Working Time Regulations 1998 (which derive from the WTD) in light of this decision when faced with a similar set of facts.

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