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Worker who does not Request Leave does not Necessarily Lose the Right to Pay in Lieu

The European Court of Justice (“ECJ”) has recently held in Kreuziger v Land Berlin [2018] that a worker who does not apply for paid annual leave during employment does not automatically lose the right to payment in lieu of untaken leave upon terminating their employment. The case involved consideration of the interpretation of Article 7(2) of the EU Working Time Directive (No.2003/88).

The Claimant was a legal trainee employed by the Land of Berlin (“the Land”), he did not take paid annual leave during the last few months of his traineeship. After his traineeship ended, the Claimant requested an allowance in lieu of untaken leave. The Land refused the Claimant’s request and the Claimant took the Land’s refusal to the Administrative Court. The Administrative Court concluded that the Land’s decision complied with German law. The court also considered that entitlement to payment in lieu under Directive 2003/88 is based on the premise that the individual was unable to take his leave for reasons not attributable to him. The matter was then brought before the German labour courts who stayed proceedings and referred the Claimant’s case to the ECJ.

The ECJ considered Article 7(2) of the Directive which provides ‘the minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated’. The ECJ confirmed that national law can set down conditions for exercising the right to annual leave, including when the right to annual leave is lost at the end of a given reference period. However, the ECJ made it clear that employers must ensure that workers are given the opportunity to exercise such a right otherwise it would not be compliant with Article 7. The ECJ commented that ‘the worker must be regarded as the weaker party in the employment relationship, and it is therefore necessary to prevent the employer from being in a position to impose upon him a restriction of rights’.

So what does this mean for employers? This ruling means that the burden of proof is on the employer to show that they have encouraged the worker to take their annual leave and that they have informed the worker accurately and in good time of the risk of losing their entitled annual leave at the end of a given reference period. If the employer fulfils its obligations then the court may agree with the employer that the worker has deliberately declined their right to take annual leave and may suffer loss of entitlement to payment in lieu on termination of their employment in accordance with Article 7(2).

This bulletin is for general guidance purposes only and should not be used for any other purpose.

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