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Vacations and overtime allowance – the Court of Justice of the European Union´s vision

By 14 Janeiro, 2022Janeiro 28th, 2022No Comments

By way of a Reference for a Preliminary Ruling from the German Federal Labor Court referred to the Court of Justice of the European Union (CJEU) the case that was pending before the German courts, and, pitted an employee and his employer against each other on the issue of overtime supplements for vacations. The CJEU handed down its judgment on January 13, 2022. 

The de facto situation 

During the month of August 2017, the employee hired as a full-time temporary worker, worked a total of 121.75 hours in the first 13 days of the month. On the remaining 10 working days of the month, he took paid annual leave corresponding to 84.7 hours of work. 

The German General Collective Agreement on Temporary Work provides for an overtime allowance if the number of hours worked exceeds the threshold of 184 hours per month. 

In August 2017, the employer did not pay this supplement to the employee, on the grounds that the use of vacations was not counted for the purposes of calculating hours for overtime supplement purposes.   

Considering this, the worker brought an action in the First Instance, considering that the days of annual leave should be taken into account to determine the number of hours worked. His action was dismissed both by the first instance and on appeal.   

With a view to a favorable decision, the employee appealed to the German Federal Supreme Labor Court. This Court referred the case, by way of “Preliminary Reference”, to the CJEU.   

Reference for a Preliminary Ruling 

In a Preliminary Reference, the German Federal Supreme Labor Court pointed out that the Convention provides that «only hours worked may be counted in determining whether the worker has exceeded the hourly quota limit of normal monthly working time.» 

In this sense, the term “hours worked” refers to the concept of hours where the employee actually worked, excluding vacation periods, since the purpose of this overtime allowance is, under the terms of the aforementioned Convention, to compensate workers who work beyond their contractual obligations. Thus, the right to this supplement is acquired through work, and vacation periods cannot be counted. In light of this understanding, the German Federal Supreme Labor Court had doubts as to the compatibility between this scheme provided for in the Convention and the CJEU’s case law, since, in practice, it implies a restriction on the right to the supplement and constitutes a way to dissuade the worker from exercising his right to the minimum period of paid annual leave.   

EU general framework 

It is worth noting here the EU standard of law in the judgment under review. The CJEU considered Article 31(2) of the Charter of Fundamental Rights of the European Union (Charter) and Article 7 of Directive 2003/88 of the European Parliament and of the Council (Directive) to be extremely relevant. The former states that “Every worker has the right of limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave”, while the latter (which must be interpreted in the light of the former) states that “State-Members shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice”. 

The CJEU has previously expressed its views on the importance of the right to paid annual leave, in particular in its judgment of 6 November 2018, which states that it “must be regarded as a principle of Union social law which, being of particular importance, cannot be derogated from and the application of which by the competent national authorities may be effected only within the limits expressly provided for by that directive”. 

Of extreme value in this regard are the judgments of 6 November 2018 and 13 December 2018, both from the CJEU, which respectively state that: “incentives to forgo rest leave or to induce workers to forgo leave are incompatible with the objectives of the right to paid annual leave (…). Thus, any practice or omission by an employer which has a potential deterrent effect on the use of annual leave by a worker is also incompatible with the purpose of entitlement to paid annual leave; and that ‘where the remuneration paid in respect of entitlement to paid annual leave (…) is lower than the normal remuneration which the worker receives during periods of actual work, there is a risk that the worker will be induced not to take his paid annual leave (…), since that would lead, during those periods, to a reduction in his remuneration.” 

However, in the specific case at issue, the exercise of the right to paid annual leave by the worker resulted in a decrease in the remuneration earned in the month of August 2017 compared to that which he would have received if he had not taken days of leave, which goes against the meaning, on the one hand, of the EU rules described above and, on the other, of CJEU case law. 

The CJEU then concluded on the question referred that “an accounting mechanism for hours worked, such as the one at issue in the main proceedings, under which the use of leave may entail a reduction in the worker’s remuneration since that remuneration is reduced by the supplement for overtime actually worked, is liable to dissuade the worker from exercising his right to paid annual leave during the month in which he worked overtime”, which does not comply with Article 7 of the Directive. This is in breach of Article 7 of the Directive, read in the light of Article 31(2) of the Charter, which must be interpreted as opposing a provision such as the one in the Convention, invoked as an argument for dismissing the action before the German courts.   

In short, taking into account the extensive Community case-law in this regard, it can be said that, even if it is a supplement to be received in the specific case where the worker works overtime, the concept of “paid leave” must be extended to cover situations in which there is a reduction in pay as a result of taking leave, since this may, in practice, be a reason for the worker not to take his entitlement, which undermines the useful meaning of the Community rules on this matter. Consequently, the Member States may not, in any manner whatsoever, establish mechanisms that undermine this right and enable the employer to dissuade, albeit indirectly, the worker from exercising the right to paid annual leave.   


Rita Sequeira Marcolino @ DCM | Littler