Case C-124/05, Federatie Nederlandse Vakbeweging v. Netherlands

Minimum period of paid annual leave carried over from previous year cannot be replaced by an allowance in lieu.

Because of the
judicial vacation, news is still a bit sparse, so to continue on discussing some more of recent Opinions and Cases: in Case 124/05, the Court held that the Working Time Directive precludes the possibility of having the minimum period of annual leave be replaced by an allowance in lieu, where that leave is carried over to a subsequent year.

Article 7 of the Directive stipulates that “every worker is entitled to paid annual leave of at least four years … which may not be replaced by an allowance in lieu, except where the employment is terminated”.

The Directive was transposed in the Dutch Civil Code, Article 7:634 of which provides that “An employee shall acquire, for every year in which he was entitled to pay during the full agreed duration of work, entitlement to holiday leave of at least four times the agreed duration of weekly work ...”.

Furthermore, Article 7:640 states that “so long as his contract of employment is in force, an employee cannot waive his entitlement to leave in return for compensation."

The Netherlands Government interpreted this latter provision as allowing an employee who had, in one year, not taken his minimum annual leave, to receive an allowance in lieu for that leave in a subsequent year.

It had published this view in a brochure published by the Netherlands Ministry of Social Affairs and Employment.

Federatie Nederlandse Vakbeweging, the largest federation of trade unions in the Netherlands, brought an action before the District Court of The Hague seeking a declaration that this interpretation is incompatible with the Working Time Directive. The District Court referred the question to the Court of Justice.

The Court, referring to the BECTU and Dellas cases (links below) first of all reiterated that harmonisation at the Community level is intended to guarantee better protection of the safety and health of workers, inter alia by guaranteeing the right of workers of a minimum period of paid annual leave.

This entitlement is an important principle of Community social law from which there are no derogations. The significance of a minimum period of paid leave remains if it is taken during a later year, because this will still contribute to the safety and health of workers.

However, allowing such leave carried over to be replaced by financial compensation is incompatible with the objectives of the Working Time Directive, since this would create a incentive not to take leave at all.

Text of Judgement

Relevant case law:
Case C‑173/99 BECTU [2001] ECR I‑4881
Case C-342/01 Merino Gómez [2004] ECR I-2605
Case C‑14/04 Dellas and Others, nyr