Austria's annual leave legislation on its long journey to Europe

Abstract

This article discusses a recent decision of the Austrian Supreme Court on the period of limitation for annual leave entitlements in light of the Working Time Directive 2003/88 (WTD). In the past, the Supreme Court's case law has repeatedly been criticised in the literature, as the Court – based on the corresponding national provision – considered the (rather long) period of limitation after the mere passage of time to be in line with EU law. The decision under discussion has now changed this line of case law, but questions remain over the legal methodology.

Case

Austrian Supreme Court (Oberster Gerichtshof – OGH) of 27.6.2023, 8 ObA 23/23z, ECLI:AT:OGH0002:2023:008OBA00023.23Z.0627.000.

I. Introduction

In the recent past, the Austrian Supreme Court (Oberster Gerichsthof – OGH) has repeatedly ruled on the period of limitation for annual leave entitlements. ¹ This has been a challenging task as, contrary to the case law of the European Court of Justice (ECJ), Austrian annual leave law does not recognise any obligation on the part of the employer to request the use of annual leave in advance and to inform the employee about the impending period of limitation. Instead, national law standardises the limitation period after the simple expiry of two years from the end of the annual leave year in which the entitlement arises. The case before the ECJ in LB v TO ² has prompted the Austrian Supreme Court to rethink its position: without the employer observing the obligation to request and inform, the right to annual leave cannot become time-barred. This case note will discuss why the Austrian Supreme Court did not address the corresponding case law of the ECJ until recently, why it changed its approach, and how this result can be methodologically justified.

II. Taking the long road to conformity with the WTD

The Austrian legislation on annual leave has the following characteristics. Employees are entitled to five weeks of annual leave per year (extended to six weeks after 25 years of service). ³ The actual consumption of leave must be agreed between employer and employee. ⁴ Upon termination of the employment relationship, the employee is entitled to annual leave indemnity payment for the outstanding annual leave entitlement. ⁵ Section 4 para. 5 of the Annual Leave Act provides for a limitation period concerning the right to annual leave and reads as follows (unofficial translation by the authors): ‘The right to annual leave expires two years after the end of the annual leave year in which it arose.’

Following the rulings in the ECJ cases of King ⁶ , Max-Planck-Gesellschaft ⁷ and Kreuzinger, ⁸ a growing number of voices in Austrian legal literature have argued that this limitation rule is likely to be in conflict with Art. 7 WTD and Art. 31 para. 2 CFR. ⁹ However, the Supreme Court considered the Austrian statutory limitations rule to be in accordance with Union law in a number of decisions ¹⁰ that were passed after these ECJ rulings. It argued that the long limitation period of three years, in comparison to one-year period at issue in the German cases before the ECJ in Max-Planck-Gesellschaft and Kreuzinger, made it possible for the employee to actually claim the leave or to secure the claim by means of an action for declaratory judgment. What the Supreme Court failed to outline, however, was how even a long period of limitation in itself adequately informs the employee of the impending period of limitation (as stated in the Max-Planck-Gesellschaft case) ¹¹ or how the long duration is equivalent to a request made by the employer to the employee to take his/her annual leave (as stated in the Kreuzinger case). ¹²

III. The decision of the Supreme Court that changed everything

Recently, the Austrian Supreme Court ¹³ once again had to decide on the issue of the statute of limitations. In the case at hand, an employee claimed financial compensation for the outstanding annual leave entitlement of 322.75 days after the termination of the employment relationship, which lasted about 17 years. He pointed out that the claim was not time-barred because he had not had any real opportunity to take his annual leave due to operational circumstances. The employer had also not requested that he do so and had not informed him of the impending period of limitation. On the other hand, the employer argued that the claimed annual leave indemnity payment related to an entitlement that was time-barred.

The Supreme Court referred to the more recent ruling of the ECJ in LB v. TO, ¹⁴ which concerned a German limitation period similar to the Austrian one, i.e., of three years. In the earlier cases of Max-Planck-Gesellschaft and Kreuzinger, the employers claimed the maximum time period of one year (and three months) to use annual leave under the German Federal Annual Leave Act (Bundes-Urlaubsgesetz); it was not considered applicable if the employer did not fulfil his/her duty to request and inform. In LB v. TO the employer claimed that in any case the general limitation period of three years provided for in the German Civil Code applied. Even to apply this rather long period the ECJ stated that it was necessary for the employer to actually put the employee in a position to exercise the right to take annual leave.

Thus, the Austrian Supreme Court granted the employee his entitlement to the annual leave indemnity payment as the employer had neither requested the employee to take his annual leave nor informed him of the impending limitation period. However, the court only suspended the limitation period for the amount of annual leave provided for in the WTD, i.e., four weeks per year. The remaining fifth and sixth (after 25 years of service) weeks are still time-barred, without the employer having to request and inform the employee to use his/her annual leave as Union law does not apply to them.

This is an approach the Austrian Supreme Court has also taken following the ECJ ruling in job-medium GmbH, ¹⁵ in which it considered Austrian legislation that stated no annual leave indemnity payment was payable if the worker unilaterally terminated the employment relationship early and without cause. The Court ruled that this does not apply to the amount of annual leave provided for in the WTD, for the remaining one or two (after 25 years of service) weeks the allowance in lieu is still cut in case of such a termination. ¹⁶ The Annual Leave Act has even been recently amended in this sense to align it with European Union requirements. ¹⁷

The recent ruling of the Supreme Court now finally brings the application of the Austrian limitation period for annual leave in line with the interpretation of Art. 7 para. 1 WTD by the ECJ. However, the Austrian Court did not give in without taking some kind of potshot. It argued that the previous rulings of the ECJ in the cases of King, Kreuziger and Max-Planck Gesellschaft could still be understood in terms of the ‘division of tasks in the implementation of claims based on a Directive’ and the general requirements of the ECJ on limitation law. Accordingly, the limitation periods for claims based on EU law may not be shorter than those for other national legal claims and the limitation periods may not prevent effective enforcement. ¹⁸ Only with the latest decision has the ECJ has clarified that it ‘retroactively establishes an employer's duty of conduct irrespective of the concrete possibilities of efficient law enforcement’. The Supreme Court therefore upheld the complaint as far as the four weeks of annual leave as provided for in the WTD were concerned.

IV. Methodological considerations

The Austrian Supreme Court has not made clear how it reached its decision methodologically. The obvious avenue would be an interpretation of the national legislation in conformity with the WTD. The ECJ has held that the obligation on a national court to refer to the content of a directive when interpreting and applying the relevant rules of domestic law is limited by general principles of law and it cannot serve as the basis for a contra legem interpretation of national law. ¹⁹ The Austrian Supreme Court has ruled similarly. ²⁰ Section 4 para. 5 Annual Leave Act links the limitation period exclusively to the expiry of a certain period of time. Other conditions, such as an obligation on the part of the employer to inform or request that leave is taken, do not feature in the Act at all. The purpose (telos) of the limitation period also points in a different direction: the legislator wanted to ensure that employees would take their annual leave, preferably in the year in which the entitlement arose; therefore - as the Supreme Court stated - the hoarding of annual leave entitlement was subject to the ‘sanction’ of the statute of limitations. ²¹ At first glance at least, an interpretation in conformity with the WTD is therefore not possible. However, a way out could be that the reference to the limitation period by the employer could be contra bonos mores unless he/she has previously requested that the annual leave be taken and/or has informed the employee of the adverse consequences. ²² In any case, a preferable solution would be an amendment of the Annual Leave Act establishing an explicit duty on the part of the employer to inform and request, as a transparent prerequisite, the right to annual leave to become time-barred. Employees would then not have to refer to jurisprudence but would be able to refer to an explicit legal basis in the Annual Leave Act.

V. Conclusion

Austrian legislation on annual leave explicitly stipulates that annual leave entitlements become time-barred after the simple passage of time. The law does not provide for an employer's prior obligation to inform the employee of impending limitation period or request that he or she take annual leave, which is why the Austrian Supreme Court did not examine this as a prerequisite for the application of the limitation period in the past. It was only the ECJ case of LB v TO that prompted the Supreme Court to change its case law. Its interpretation of the Austrian Annual Leave Act has finally been aligned with the jurisprudence of the ECJ, although the methodological basis for this still remains to be clarified.