Employees may claim compensation in connection with the termination of employment if the employee has not taken vacation and the employer has not ensured a real opportunity to do so.
In a recent judgment, the European Court of Justice has ruled on employees’ right to compensation for vacation that has not been taken before the termination of employment. The European Court of Justice stated that employers must actively ensure that employees have a real opportunity to exercise their right to vacation before termination. If the employer has not ensured this, the employee is entitled to compensation for the vacation that the employee has not taken before their termination.
The case concerned the German employee Tetsuji Shimizu, who was employed on a fixed-term basis by the private organization Max-Planck from August 2001 to December 2013. In October 2013, Max-Planck encouraged Tetsuji Shimizu to take his accrued vacation before his termination at the end of December 2013. Max-Planck did not instruct Tetsuji Shimizu to take the vacation on specific days. Tetsuji Shimizu took two vacation days and then claimed compensation for the remainder of the vacation that had not been taken. Max-Planck refused to pay compensation and referred to the fact that, under German law, employees could only receive compensation if the employee had not taken the vacation due to the termination of employment. Max-Planck believed that Tetsuji Shimizu had had the opportunity to take the vacation before his termination and had also been encouraged to do so. Tetsuji Shimizu disagreed and therefore brought an action against Max-Planck before the German courts.
After Tetsuji Shimizu had been successful in the first two instances, the case ended up before the Bundesarbeitsgericht (the German Federal Labour Court). The Bundesarbeitsgericht concluded that German law should be understood as meaning that the employee was only entitled to compensation if the employee had requested the employer to grant the vacation and the employer had refused to do so. However, the Bundesarbeitsgericht was in doubt as to whether the German legislation on this point was in accordance with the provisions of the EU Vacation Directive and the EU Charter. Therefore, the Bundesarbeitsgericht referred this question to the European Court of Justice. In addition, the Bundesarbeitsgericht also wished to clarify whether the EU Vacation Directive and the EU Charter applied directly in a case between two private parties.
On the first question, the European Court of Justice initially noted that the employee’s right to take accrued vacation is a fundamental principle under both the EU Vacation Directive and the EU Charter. The purpose of this right is to ensure effective protection of the employee’s safety and health by giving the employee a real opportunity to rest, relax and enjoy their free time for a period.
Furthermore, the European Court of Justice noted that, in accordance with the EU Vacation Directive, the employee is entitled to compensation for accrued vacation that the employee has not taken at the termination of employment. However, the employee’s right to compensation for untaken vacation in connection with termination is not unconditional, but depends on the specific circumstances underlying the fact that the employee has not been able to take their accrued vacation.
In this connection, the European Court of Justice noted that it is up to the Member States themselves to lay down the rules for the specific circumstances under which the employee is entitled to compensation for accrued vacation that the employee has not been able to take at the termination of employment. However, the European Court of Justice also noted that a strict interpretation of the rules to the detriment of the employee must not be made. The employee must be considered the weaker party in the employment relationship. It is therefore necessary to ensure that the employer cannot impose a restriction on the employee’s right to take accrued vacation.
The European Court of Justice emphasized that the crucial point is whether the employee has actually had the opportunity to exercise their right to accrued vacation. In this connection, it is the employer’s duty to ensure that the employee has taken their accrued vacation. This means that the employer must, if necessary, encourage the employee in good time to take their accrued vacation, and the employee must also be informed in good time in advance that the right to the accrued vacation is forfeited if it is not taken before the termination of employment. In addition, the employer must be able to prove that the employer has actually given the employee the opportunity to take their accrued vacation. If the employer cannot do so, the employee retains the right to take the accrued vacation or to compensation if the vacation has not been taken.
In relation to the case in question, the European Court of Justice then concluded that the employee could not automatically forfeit their right to compensation merely because the employee had not requested the vacation themselves or ensured that it was taken before the expiry of the employment relationship. It had to be determined specifically whether the employer had actually given the employee the opportunity to take their accrued vacation before termination. Therefore, according to the European Court of Justice, the German legislation was in conflict with the EU Vacation Directive and the EU Charter, unless the Bundesarbeitsgericht could reach an interpretation of the rules in the German legislation that could ensure that the EU Vacation Directive and the EU Charter were nevertheless complied with.
With regard to the second question, the European Court of Justice noted that, even if a provision in an EU directive is sufficiently precise, it cannot have direct horizontal effect in cases where the parties are private. Therefore, the EU Vacation Directive could not find direct horizontal application in a case such as the present one between an employee and a private employer. In relation to the EU Charter, on the other hand, the European Court of Justice found that the EU Charter provision, which gives an employee a corresponding right to take accrued vacation, was sufficiently precise for it to be directly applicable in a case between an employee and a private employer. The EU Charter could therefore be invoked directly in the specific case.
The judgment shows that, in the light of the EU Vacation Directive and the EU Charter, the European Court of Justice imposes an active role on the employer in ensuring that the employee actually has the opportunity to take their accrued vacation before the termination of employment. The judgment also shows that, although the EU Directive’s provision on the right to accrued vacation cannot be invoked directly in a case between an employee and a private employer, a corresponding provision in the EU Charter, on the other hand, may well find direct horizontal application in such a case. The European Court of Justice has also on other occasions established the same for other provisions in the EU Charter. For example, the EU Charter’s provision on information and consultation of employees has been given direct horizontal effect in a case between a trade union and a private employer. The same applies to the EU Charter’s prohibition of discrimination.