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Paid Annual Leave May Be Calculated On Pro Rata Basis For Zero-hours Contracts

In Heimann and anor v Kaiser GmbH the ECJ has held that calculating the paid annual leave of workers on short-time working on a pro rata temporis basis did not breach EU law. ECJ case law requiring the accrual of paid annual leave in full while on sick leave was of a fundamentally different character and could not be applied in such situations. Instead, short-time working is analogous to part-time working, in respect of which case law has accepted the pro rata principle.

In 2009 K GmbH dismissed the claimants but later agreed with its works council to extend their contracts on a ‘zero-hours short-time working basis’, in order to improve their position with regard to unemployment benefits. When the claimants’ employment ended in 2010 they claimed compensation for annual leave not taken in 2009 and 2010. K GmbH argued that they did not acquire any right to paid annual leave while they were on the zero-hours contracts. A German court, the Abereitsgericht Passau, made a reference to the ECJ asking whether applying the pro rata temporis rule, so that the workers only accrued paid annual leave in respect of periods they had actually worked, would be compatible with the EU Working Time Directive (No.2003/88) and Article 31(2) of the Charter of Fundamental Rights of the European Union.

The ECJ noted that the right to paid annual leave was a particularly important principle of European law which cannot be interpreted restrictively. However, the Court’s decisions in cases such as Schultz-Hoff v Deutsche Rentenversicherung Bund; Stringer and ors v HM Revenue and Customs (Brief 871), which held that workers on sick leave can continue to accrue paid annual leave while on sick leave, could not be applied in to the ‘fundamentally different’ situation of a worker on short-time working. The short-time working agreement had suspended the employee’s obligation to work and the employer’s obligation to pay salary. Agreeing to this had prevented the workers’ dismissal – employers would be less likely to agree to the plan if they were required to pay short-time workers a sum in respect of paid annual leave, therefore depriving workers of the plan’s positive effects. Furthermore, workers on short-time working are free to participate in leisure and recreational activities, which a worker on sick leave cannot enjoy.

Although formally employed on full-time contracts, short-time workers were, in the Court’s view, in a comparable situation with part-time workers. The Court’s decision in Zentralbetriebsrat der Landeskrankenhäuser Tirols v Land Tirol (Brief 902) showed that use of the pro rata temporis rule was justified on objective grounds in respect of part-time workers. Thus, the Court held that the Working Time Directive and the Charter of Fundamental Rights did not preclude national legislation or practices requiring the paid annual leave of workers on short-time working to be calculated according to the pro rata temporis rule.

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