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Pay in lieu of untaken leave held to accrue to deceased employee's estate

In Wuppertal v Bauer and Willmeroth Broßonn the CJEU has held that the heir of a worker who dies while in an employment relationship with a public or private employer has a right to financial compensation in lieu of the worker's untaken paid annual leave. The right to annual leave was confirmed to constitute an essential principle of EU Social Law necessitating protection.

Facts

Mrs Bauer is the sole legal heir of her husband, who died in December 2010. He was employed by Stadt Wuppertal, who rejected Mrs Bauer's request for an allowance of EUR 5857.75, for the 25 days of outstanding paid annual leave, which her husband had not taken at the time of his death.

Mrs Broßonn was the sole legal heir of her husband, who died on 4 January 2013 having been employed by Mr Willmeroth since 2003. He was unable to work since July 2012 due to illness. Mr Willmeroth rejected Mrs Broßonn's request for EUR 3702.72, for the 32 days of outstanding paid annual leave, which her husband had not taken at the time of his death.

The Applicant made a request for a preliminary ruling concerning the interpretation of Article 7 of Directive 2003/88/EC ("Article 7") concerning certain aspects of the organisation of working time and of Article 31(2) of the Charter of Fundamental Rights of the European Union ('the Charter').

The court was asked to address:.

1) Whether Article 7 of Directive 2003/88 and Article 31(2) of the Charter must be interpreted as national legislation.

2) Whether those provisions of EU law have direct effect, as a result the national court is required to set aside that national legislation cannot be interpreted in a manner consistent with the requirements deriving from those provisions.

Under domestic legislation in Germany, where the employment relationship is terminated by the death of the worker, the right to paid annual leave not taken by the worker before his death lapses without giving rise to an entitlement to an allowance in lieu of that leave which may be passed on to the worker's legal heirs by inheritance.

However, according to settled case-law of the European Court, every worker's right to paid annual leave must be regarded as a particularly important principle of EU social law from which there may be no derogations and whose implementation by the competent national authorities must be confined within the limits expressly laid down by Directive 2003/88.

Upon termination of the employment relationship, the actual taking of paid annual leave to which a worker was entitled is no longer possible. In order to prevent this impossibility from leading to a situation in which the worker loses all enjoyment of that right, even in pecuniary form, Article 7 provides that the worker is entitled to an allowance in lieu for the days of annual leave not taken.

The reason for termination of the employment relationship is not relevant as regards the entitlement to an allowance in lieu provided for in Article 7. The Court was not willing to accept that death retroactively entails the total loss of the right thus acquired which includes a second aspect of equal importance, namely the entitlement to a payment.

The Court confirmed that the right to paid annual leave acquired by a worker is purely pecuniary in nature and, as such, is therefore, intended to become part of the relevant person's assets and will be transferred to his estate on death.

The right to paid annual leave, as a principle of EU social law, is also expressly laid down in Article 31(2) of the Charter.

Member States are precluded from deciding that termination of the employment relationship caused by death leads retroactively to the complete loss of the right to paid annual leave acquired by the worker. The question whether a national provision must be disapplied if it conflicts with EU law arises only if no interpretation of that provision is possible which is compatible with EU law. In that regard, when national courts apply domestic law, they are bound to interpret it, so far as possible, in the light of the wording and the purpose of the directive.

Article 31(2) of the Charter dictates that the national court must disapply national legislation that the death of a worker retroactively deprives him of his entitlement to paid annual leave acquired before his death. It also by its very nature, creates a corresponding obligation on the employer to grant such periods of paid leave.

In the event that the referring court is unable to interpret the national legislation at issue in a manner ensuring its compliance with Article 31(2) of the Charter, it will therefore be required, disapply that national legislation.

This has potentially far-reaching implications for employers who may now be required to make payments to the estates of deceased employees. There is also the potential for retrospective claims.

If you are looking for any more information with regards to the impact of this judgment or any of our services view our Employment & HR section. You can also contact Emma Swan in our Employment & HR department via email or phone on 0333 207 1130. Alternatively send any question through to Forbes Solicitors via our online Contact Form.

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