No Reduction in Holiday Pay due to Short-Time Work
European Court of Justice (ECJ), decision of 13 December 2018, file ref. C-385/17
The holiday pay provided for the statutory minimum leave may not be less than the normal remuneration, even in the event of short-time work. However, short-time work may lead to a reduction in the duration of the minimum annual leave.
In 2015, a German employee was on short-time work for half of the year without having performed any work during this period. According to the Federal Framework Agreement for the Construction Industry (BRTV-Bau) applicable to the employment relationship, employees are entitled to 30 days of annual vacation regardless of short-time work. At the same time, according to the BRTV-Bau, the short-time working periods are taken into account in the amount of remuneration paid for annual leave and therefore the holiday pay is reduced. The employee objected to this reduction by bringing an action before the Labor Court (ArbG) of Verden which appealed to the ECJ. According to the German Federal Vacation Act (BUrlG), the reduction of holiday pay due to short-time work is possible by deviation through a collective agreement - as in the present case. The Verden ArbG asked for clarification as to whether this national regulation under the BUrlG, according to which deviations from the BUrlG may be made in collective agreements, is in conformity with Union law.
The ECJ first of all stated that under Union law every employee is entitled to a minimum of four weeks' paid annual leave. Two aspects must be taken into account with regard to minimum annual leave. On the one hand, the duration of the minimum annual leave and, on the other, the holiday pay. With regard to the duration of the minimum annual leave under Union law, the ECJ has ruled that no leave entitlement guaranteed under Union law arises in the case of short-time working periods during which no work is done. The employee who filed the complaint would only be entitled to two weeks of minimum annual leave under Union law due to the fact that short-time work accounts for half of the year. However, the ECJ also made it clear that more favourable national provisions remain possible. It is not objectionable under Union law when national legislation or a collective agreement - as in the present case - grants longer annual leave irrespective of whether short-time work is being performed or not.
With regard to holiday pay, the ECJ has ruled that the national regulation must be interpreted in conformity with Union law in such a way that for the duration of the minimum leave guaranteed by Union law, the average of normal pay must be paid even in the case of short-time work. In contrast, Union law does not require additional benefits under collective agreements or the fundamental consideration of overtime when determining normal holiday pay. The ArbG Verden now has to decide how the ECJ decision affects the payment of holiday pay for the employee's 30-day holiday.
Consequences in Practice
The judgment of the European Court of Justice is in line with the recent difficult case law on holiday law. The demands on employers will be further increased. The decision leads to even more bureaucratic work on the employer's side (differentiation between minimum leave under Union law with the possibility of reducing the duration but not the amount of leave and additional contractual or collectively agreed leave with the option of reduction). In the end, the decision does not lead to a noticeable improvement in holiday entitlements from the employee's point of view. In the case at hand, for instance, a Union-law entitlement to further holiday pay may exist only for two weeks of the minimum leave under Union law which the employee has earned, instead of for the entire six-week annual holiday. The ECJ confirms that the purpose of leave under Union law is also to ensure that the employee must earn the minimum leave (with the exception of sickness) and allows the reduction of the minimum leave entitlement in the case of short-time work, which can be regarded as positive from the employer's point of view.
The decision makes clear how important it is that employers review their employment contracts, but also collective agreements, to ensure that they are up to date and not only make a precise distinction between statutory minimum leave and additional contractual or collectively agreed leave, but also adjust the options for reduction. At the same time, the decision gives rise to a close review of payments of holiday pay.