Enjoyment of annual leave, the recent ruling of the European Court

In relation to a recent case (C-218/2022), the Advocate General of the European Court of Justice, in the conclusions submitted on June 8, 2023, established that national legislation that encourages the use of paid annual leave instead of monetization is permissible.

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Enjoyment of annual leave
Indeed, this provision appears to be in line with the objectives pursued by the effective exercise of the right to annual leave, which is of fundamental importance in allowing workers to replenish their mental and physical energies, contributing to their health both in the workplace and outside of it.

The case examined by the European Court of Justice

The case examined by the European Court of Justice originated from the appeal filed by a worker before the Court of Lecce, the referring court. In the present case, the worker, a public employee, after submitting his voluntary resignation on March 24, 2016, in order to benefit from early retirement, and thus definitively terminating his employment relationship on October 1, 2016, filed a lawsuit against his former employer, claiming:
  • that he had accrued a total of 79 days of paid unused annual leave between 2013 and 2016,
  • therefore, he requested their monetization.

The employer, in its defense:

  • clarified that the worker was aware of the obligation to take the annual paid leave and the impossibility of monetizing it,
  • invoked the provisions of Article 5 of Decree Law no. 95/2012, according to which public employees’ annual leave must be taken, and their non-use cannot result in the payment of substitute financial benefits.

The preliminary questions raised by the referring court

The Court of Lecce explained that the interpretation given to Article 5 of Decree Law no. 95/2012:
  • allowed the monetization of leave only when it had not been taken for reasons beyond the worker’s control,
  • but at the same time stated that the worker could be deprived of receiving substitute financial benefits if the termination of the employment relationship, as in the case of resignations, was foreseeable.
Having doubts about a potential conflict between this provision and the European directive concerning working time, the referring court asked the European Court of Justice to rule on the following preliminary questions:
  • whether European legislation should be interpreted as precluding national legislation that prohibits the monetization of leave in the case of voluntary resignations,
  • whether, in the event of an affirmative answer to the first question, the public employee must demonstrate the impossibility of taking leave during the employment relationship.

The ruling of the European Court of Justice

With regard to the first preliminary question raised, the European Court of Justice established that European legislation does not preclude national legislation that prohibits the monetization of unused paid annual leave at the end of the employment relationship when:

  • the prohibition on requesting monetization of leave does not concern the right to annual leave accrued in the year of termination of the employment relationship,
  • the worker had the opportunity to take paid annual leave in previous reference years,  the employer encouraged the worker to take leave,
  • the employer informed the worker that unused paid annual leave cannot be accumulated and replaced by a request for monetization at the end of the employment relationship.
Regarding the second preliminary question raised, the European Court of Justice ruled that the burden of proof lies with the employer to demonstrate:
  • that the worker was given the opportunity to take leave,
  • that the worker was informed of the impossibility of monetizing leave at the end of the employment relationship, and despite that, still decided not to take leave. Otherwise, if the employer fails to prove the above, the worker must be compensated.

Conclusions

In light of all the above, it is crucial for employers to remind their employees of the importance of taking paid annual leave and encourage a rational planning of it, considering that it represents a right of fundamental importance, whose purpose is to enable workers to recover their physical and mental energies.

 

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