EU Clarification: Worker Minimum Holiday Pay Cannot Be Reduced To Reflect Short-Time Working

Author:Ms Virginia Allen, Sarah Beeby, Ryan Carthew, Mark Hamilton and Jessica Pattinson
Profession:Dentons
 
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Most of the case law surrounding the calculation of statutory holiday pay is concerned with what elements of pay are to be included. Hein v. Albert Holzkamm, however, also addressed the question of what period should form the basis of the calculation of normal pay.

Background

Mr Hein was employed by Holzkamm as a concrete worker. In 2015, Mr Hein was working short-time and did not perform any actual work for 26 weeks. However, as would be the case in the UK, the employment relationship continued throughout this period.

During the course of his employment, Mr Hein was under a collective agreement with Holzkamm, which provided that holiday pay would be paid on the basis of a 13-week average calculation, in accordance with a long-standing provision of national law in Germany. When he took his holiday (including the four weeks required under the Working Time Directive) Mr Hein's holiday pay was therefore calculated on the basis of average pay over the period of short-time working, so excluding overtime for example, meaning that it was lower than his normal pay while working. Holzkamm's reason for using average pay in its calculation was that German law, although requiring the calculation of holiday pay to be based on normal pay in line with recent European cases, allowed for the possibility of derogation by a collective agreement.

CJEU decision

The Court of Justice of the European Union (CJEU) held that this breached EU law in respect of the four weeks' paid holiday guaranteed by Article 7(1) of the Working Time Directive. It held that a guaranteed four weeks' paid leave was necessary for health and safety purposes and enabled workers to take their holiday entitlement without losing out financially. The CJEU concluded that German legislation, in allowing for collective agreements to take into account reductions in earnings due to short-time working for calculating holiday pay, was incompatible with EU law. However, the CJEU also highlighted that the right to accrue annual leave arises from actual work. The object of allowing a worker to rest assumes that the worker has engaged in work from which they should be given a rest in order to protect their health and safety. Accordingly, annual leave would not accrue under the Directive during periods when no work was carried out. Instead, the CJEU directed that holidays under the Directive should be calculated by reference to periods of actual work completed under the employment contract. So, after 26...

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