Abstract
This article analyses how the Court of Justice of the European Union has interpreted and applied principles on annual leave developed by the International Labour Organization (ILO). It traces the evolution of these principles within ILO Conventions and Recommendations, and how they became to be included in EU Directive 93/104 (and its successor, Directive 2003/88). Through a detailed examination of Court's case law, the study investigates how the Court has relied on ILO principles to interpret the right to annual leave, focusing on three key issues: (1) the accrual of annual leave entitlements during periods of inactivity (e.g., sickness or parental leave), (2) carry-over provisions for unused leave, and (3) the prevention of overlap between annual leave and other rest periods. The analysis reveals tensions between the letter and spirit of the ILO principles and their application by the Court. The article further explores the implications of adopting an approach more closely aligned with the system within which the principles were developed. Such alignment, it argues, could provide stronger justification for certain rulings, improve legal predictability, which is important for yet unresolved questions, and fit better with the dual purpose of the right to annual leave: protecting workers’ health and ensuring opportunities for leisure and recuperation.
Introduction
In the past two decades, the Court of Justice of the EU (Court) has delivered an impressive number of judgments concerning the right to annual leave (also referred to as ‘holiday’). Directive 2003/88, which guarantees the right to annual leave for all workers, does not contain any detailed rules on annual leave. However, the Preamble to the Directive requires that account be taken of ILO principles regarding the organisation of working time. This may guide the interpretation of the right mentioned in the Directive.
This contribution examines how the Court's case law has applied ILO principles, particularly in cases on the acquisition of leave rights, the expiry of such entitlements and the overlap of rest periods an annual leave. 1
To this end, Section 2 will outline the development of ILO standards on the right to annual leave, while Section 3 will discuss the adoption of the Directive(s). Section 4 will analyse the Court's interpretations and Section 5 will compare the ILO principles with the Court's interpretations. Finally, Section 6 will present the conclusions.
ILO standards on annual leave
Development of the standards
In 1936, the International Labour Conference (ILC), the legislative body of the ILO, adopted Convention 52 on Holidays with Pay, and Recommendation 47 of the same name. Convention 52 established a minimum annual leave period of six working days after one year of continuous service. The preparatory report noted that due to significant variation among national systems and practices, the inclusion of uniform standards in the Convention would likely deter ratifications. 2 Consequently, minimal requirements were laid down in the Convention and more elaborate ones were set out in the Recommendation.
Some 18 years later, when higher standards were deemed appropriate, these were also introduced through a Recommendation, No. 98.
In 1961, the ILC adopted a resolution in which it invited the Governing Body of the ILO to consider the desirability of a revision of Convention 52 with a view, inter alia, to bringing the provisions of the Convention at least into conformity with those of Recommendation 98. 3 The ILO Office followed up on this resolution by sending a questionnaire to Member States, the responses to which were analysed by the Committee of Experts in a report, hereafter referred to as the Survey. 4
The Survey served as the foundation for the proposal that eventually became the Convention on Holidays with Pay, No. 132, adopted in 1970. 5 The Survey contains several observations that are still relevant to understanding the current standards.
The purpose(s) of the right to annual leave
Whereas Convention 52 does not outline the purpose of the right to annual leave, the Preamble to Recommendation 47 states that ‘the purpose of annual holidays is to secure to employed persons opportunities for rest, recreation and the development of their faculties’. 6 Like its predecessor, Convention 132 does not mention the purpose of annual leave either.
During the Conference at which the proposal for Convention 132 was debated, some speakers argued that the purpose of international labour standards should not merely be to confirm existing practices to facilitate ratification. Instead, they should also set targets for the promotion of social progress. 7 More specifically, the goal of Convention 132 would be to protect the safety and health of workers and to provide a means for redistributing gains flowing from productivity increases.
Other participants, however, appeared hesitant to prioritise annual leave among the benefits that had become available as a result of the rapid technological change and greater productivity. 8
On the basis of the argument that ILO Member States are not obliged to ratify a Convention, and that excessively high norms would lead to low ratification levels, consensus was finally reached on setting standards that were not too different from existing practices. As a result, Convention 132 does not mention the purpose(s) of the right to annual leave.
In 2000, a report by the Working Party on Policy regarding the Revision of Standards noted that in 1961 there was broad support for the general aims of the Resolution which formed the basis for Convention 132. 9 These aims included providing workers with more rest to recuperate, as ‘increased productivity and profits made annual holidays feasible.’ 10 In the words of the Working Party: ‘The second rationale to annual leave more generally is that it represents a method to redistribute gains derived from increases in productivity in the form of more leisure available to workers’. 11
However, the Working Party acknowledged that since the adoption of the Resolution, there had not been a universal trend towards shorter working hours and increased annual leave across all regions of the world, particularly in developing countries, as they were then termed. 12
Provisions on qualification for holiday rights
Convention 52 connects the right to an annual holiday period to a minimum duration of continuous service of one year with the same employer. It was considered desirable, however, that not all interruptions of work during a year would lead to the loss of holiday entitlement. Therefore, Article 2(3) provides that public and customary holidays and ‘interruptions of attendance at work due to sickness shall not be included in the annual holiday’. Recommendation 47 provides further rules on interruptions, which can also be found in Recommendation 98. I will discuss the latter instrument here, since the Survey contains remarks on it. Its Paragraph 7(1) states that interruptions of work during which the worker receives wages should not affect entitlement to, or the duration of the annual holiday (emphasis added). This provision thus concerns interruptions for unspecified reasons during which the worker continues to receive wages. It not only concerns access to annual leave (i.e., it maintains the continuity of service element), but also the calculation of holiday rights.
Paragraph 7(2) provides that interruptions of work that do not give rise to a termination of the employment relationship or contract should not affect any entitlement to holiday rights accumulated prior to the interruption. In other words, acquired rights are not lost.
Paragraph 7(3) reads that the relevant authorities 13 should determine the manner in which the principles (which are the terms used here) set out Paragraphs 7(1) and (2) should be applied in interruptions specified in this paragraph (i.e., 7(3)). It may be assumed that the drafters had, given the nature of the interruptions, unpaid situations in mind, but the text itself does not specify this.
The situations mentioned in Paragraph 7.3 are:
sickness, accident and pre- and post-natal care periods (according to the Survey, these interruptions were most widely recognised as not affecting continuity of service, for both entitlement and duration);
14
family events;
15
military obligations; the exercise of civic rights and duties (these can include guardian duties, service on a jury, voting, the exercise of a public mandate, duties within social bodies, communal or other confidential duties imposed by law, or full-time work on a people's committee);
16
the performance of duties arising from trade union responsibilities (the Survey noted that some countries also included lockouts and strikes, although sometimes only in the qualifying period of service);
17
changes in the management of the undertaking; intermittent involuntary unemployment (according to the Survey, this concerns involuntary unemployment with a given employer).
Paragraph 8 concerns interruptions occasioned by pregnancy and confinement.
The Survey concluded that while many countries prescribed certain general or specific cases of authorised interruptions, there was little ‘harmony in the enumeration of these causes of interruptions, except in cases of sickness and employment injury.’ Therefore, it was not possible to give a uniform standard in this field in the proposed Convention 132. 18
From the Survey it also appears that Article 2(3) of Convention 52, (reading: ‘interruptions of attendance at work due to sickness shall not be included in the annual holiday’) had led to some confusion. 19 Did this provision concern the qualifying period, anti-overlapping of rest periods, or both? To answer this question, Convention 132 makes a distinction between rules on acquisition/calculation (Article 5(4)) and anti-overlapping (Article 6(2)).
Article 5(4) states that ‘Under conditions to be determined by the competent authority or through the appropriate machinery in each country, absence from work for such reasons beyond the control of the employed person concerned, as illness, injury or maternity shall be counted as part of the period of service’. This text allows Member States to circumscribe the periods of absence to be assimilated with work periods, including limits to how long these periods count. 20
Provisions on anti-overlapping
Article 6(2) of Convention 132 states that under conditions to be determined by the competent authority, periods of absence from work due to sickness or injury may not be counted as part of the minimum annual holiday. This provision is meant to regulate for how long this overlapping must not take place, and it also gives room for setting other types of conditions for counting such periods.
Provisions on carry-over periods
Article 8 of Convention 132 allows countries to provide that holiday periods are to be divided into parts, but one of the parts shall consist of at least two uninterrupted working weeks. According to Article 9(1), this uninterrupted part shall be granted and taken no later than one year from the end of the year in which the entitlement was acquired; and the remainder no longer than eighteen months from the same date. Any part of the annual holiday that exceeds a stated minimum (to be determined by the country concerned) may be postponed, with the consent of the employed person, beyond these time limits.
The purpose of this Article is, according to the ILO Office, to ensure that the worker actually receives at least part of his holiday entitlement every year and that the remainder is not postponed indefinitely. ‘It should be noted that this principle (…) can be applied with a great deal of flexibility’, the Office remarked. 21
While this Article allows for postponement of taking holidays, it does not specify the consequences if it is not complied with. Enforcement of the rules is dealt with by Article 10, which gives the employer the means to comply with the obligations embedded in Article 9: ‘the time at which the holiday is to be taken shall, unless it is fixed by, inter alia, regulation and collective agreement, be determined by the employer after consultation with the employed person concerned or his representatives’. If the holiday is not taken (fully) at the end of the employment relationship, the worker shall receive a compensation in lieu of unused leave (Article 11).
The codification of the right to annual leave in EU law
The development of Directive 93/104
Annual leave was mentioned for the first time in the Community Charter of the Fundamental Social Rights of Workers, a declaration of the Heads of State or Government in 1989. Under the heading ‘Improvement of living and working conditions’, it stated, in Point 7: ‘The completion of the internal market must lead to an improvement in the living and working conditions of workers in the European Community’. Point 8 continued: ‘Every worker in the European Community shall have a right to a weekly rest period and to annual paid leave, the duration of which must be progressively harmonised in accordance with national practices’.
This ambition was implemented in Directive 93/104 concerning Certain Aspects of the Organisation of Working time. The Directive was based on Article 118a EEC, a provision that required ‘Member States to pay particular attention to encouraging improvements, especially in the working environment, as regards the health and safety of workers’.
As regards the right to annual leave, the initial text of the proposal for the Directive solely provided that ‘Member States shall adopt the necessary measures to ensure an annual paid holiday for a minimum period’. 22
During its discussions on this proposal, the Economic and Social Committee of the European Parliament expressed its disappointment: ‘It is regrettably that the Commission has not taken sufficient account either of the Council of Europe's Social Charter or of the ILO standards in drafting the proposed Directive’. As regards the provision on annual leave it remarked that it ‘is definitely too vague’. 23
Subsequently, the European Parliament adopted an amendment to insert a recital in the proposed Directive: ‘Whereas it is appropriate that in the areas of its competence the Community should respect at least the Conventions of the International Labour Organization with regard to weekly rest periods’, and mentioned three specific instruments on weekly rest periods. 24 In response to this, the European Commission published a revised proposal that introduced a minimum annual leave period of four weeks in 12 months, which contained a slightly revised version of the Parliament's amendment. 25 This text was revised in a later text as: ‘It is appropriate that Member States take full account of the principles of the International Labour Organisation (…)’. 26
Finally, Recital 6 of the Preamble came to read: ‘Account should be taken of the principles of the International Labour Organization with regard to the organisation of working time, including those relating to night work.’ The documents do not include clarifications on the meaning or purpose of the recital. On the basis of the text itself, it can be remarked that in the succeeding texts, the ILO law to be taken into account was considerably broadened and specific addressees are no longer mentioned.
Article 7 of the Directive provides for the minimum annual leave period: ‘1. Member States shall take the measures necessary to ensure that every worker is entitled to paid annual leave of at least four weeks in accordance with the conditions for entitlement to, and granting of, such leave laid down by national legislation and/or practice. 2. The minimum period of paid annual leave may not be replaced by an allowance in lieu, except where the employment relationship is terminated.’
Directive 2003/88 and EU Charter of Fundamental Rights
At the beginning of the 21st century, it was deemed necessary to codify the case law of the Court on working and rest periods. 27 This became Directive 2003/88, now based on Article 137(2) EC, which would later become Article 153(2) TFEU. This Article allows the EU legislature to lay down minimum requirements on working conditions.
The new Directive has the same text of the recital that refers to ILO principles and of Article 7 as its predecessor.
A milestone in the development of the right to annual leave was the adoption of the Charter of Fundamental Rights of the EU, of which Article 31(2) declares: ‘Every worker has the right to (…) an annual period of paid leave.’ The Charter acknowledges the right to annual leave as a fundamental right and it does not make the right dependent to national legislation and practices. 28
Case law of the Court of Justice
Article 7 of both Directives provides that entitlement and granting of the right to annual leave is subject to national legislation and/or practice. When asked for an interpretation of this Article, the Court of Justice therefore had to examine whether the competences granted to the Member States allowed the Court to impose restrictions on the conditions they had set in their regulations on annual leave. Before discussing how the Court undertook this task, it must be remarked that its case law solely applies to the annual leave entitlement ensured by the Directive. 29
The acknowledgment of ‘a particular important principle of community law’
In BECTU, 30 the Court had to interpret Article 7 for the first time, in a case arising under Directive 93/104. It concerned a British regulation that made acquisition of entitlement to leave conditional upon the person concerned having been continuously employed for 13 weeks by the same employer. The employees in this dispute worked in sectors such as broadcasting, film and theatre, where they were employed under short-term contracts. Most of these workers therefore did not ultimately satisfy the requirement to become entitled to paid annual leave.
In answering the question of whether the British regulation was consistent with the Directive, the Court based its argument on the purpose of the Directive. The Court argued that in view of its legal basis, Article 118a EC and its recitals, the purpose was to lay down minimum requirements intended to improve the living and working conditions of workers. Article 17 of the Directive does not allow derogations from Article 7. In light of these circumstances, the Court concluded that the annual leave entitlement must be regarded as a particularly important principle of Community social law. Therefore, the implementation of Article 7 must be confined within the limits expressly laid down by the Directive.
It follows, the Court concluded, that Member States are precluded from unilaterally limiting annual leave rights by applying a precondition for such entitlement which has the effect of preventing certain workers from benefiting from it.
In her opinion in the Schultz-Hoff and Others case (see next Section) the Advocate-General pointed out that, in her view, in BECTU the Court applied the principle of the practical effectiveness (effet utile) of EU law: a Member State must not be permitted to lay down conditions that may undermine or even frustrate that entitlement. 31
Acquisition of holiday rights during periods of inactivity
Periods of sickness
In BECTU, the Court restricted the power of Member States to set conditions on the requirement of periods of work for acquiring leave rights. What latitude do they have to disregard periods of inactivity for this purpose? As regards sick leave, in the Schultz-Hoff and Others judgment, 32 the Court argued that according to its Recital 6, Directive 2003/88 ‘has taken account of the principles’ of the ILO. It should be noted that the Court did not quote the recital literally, as it stated that ‘account should be taken’, which extends not only to the drafting of the Directive, but also to its interpretation.
Subsequently, the Court invoked Article 5(4) of Convention 132: ‘… absence from work for such reasons beyond the control of the employed person concerned as illness, … shall be counted as part of the period of service’. To note, in its reference the Court left out the part of the quotation that was essential for the ILO Conference adopting this text, i.e., ‘Under conditions to be determined by the competent authority’.
On the basis of this argument, the Court concluded that a Member State cannot make the right to annual leave of workers on sick leave, conferred by Directive 2003/88, subject to a condition that they have actually worked during the leave year. 33
Parental leave periods
Does this approach also apply in the situation where a worker has taken a period of parental leave, during which she received a monthly allowance? The employee concerned asked, after she enjoyed a period of parental leave, for her annual leave to be calculated also on basis of her parental leave period. The Court was asked whether the employer's refusal to do so was consistent with Article 7 of the Directive. The answer became the Dicu judgment. 34
The Court argued that the purpose of the right to annual leave is to enable the worker both to rest from his or her work and to enjoy a period of relaxation and leisure. The right is therefore based, it continued, on the premise that the worker has actually worked during the reference period. Entitlement to paid annual leave must therefore, in principle, be determined by reference to the periods of actual work. There are exceptions to this in certain specific situations, such as sickness and maternity leave. However, such an exception does not exist in the case of parental leave, the Court held. It argued that ‘Convention 132, the principles of which must be taken into account, as stated in recital 6 of Directive 2003/88, when interpreting that Directive, counts, in Article 5(4) thereof, absences on account of illness among absences from work “for such reasons beyond the control of the employed person concerned” which must be “counted as part of the period of service”’. The Court again took the liberty of varying the quotation and now refers to the principles of Convention 132 instead of ILO principles. The relevant recommendations were not referenced in the judgments, even though they could contain important information.
To distinguish sickness and parental leave, the Court argued that whereas sickness is not foreseeable and beyond the worker's control, parental leave is not unforeseeable and, in most cases, reflects the worker's wish to take care of his or her child. Inasmuch as a worker on parental leave is not subject to physical or psychological constraints caused by illness, the situation differs from a worker unable to work due to health issues.
A comparison with maternity leave did not support the applicant's case either. Maternity leave is intended to protect the biological condition of the mother during and after pregnancy, the Court considered, whereas parental leave aims to help parents balance their occupational and parental responsibilities. 35
It should be noted that the Court added to the ‘beyond control’ element of Article 5(4), the criteria of ‘unforeseeable’ and ‘having physical or psychological constraints caused by an illness’, without clarifying how these elements relate to Article 594).
Periods of short-time work
Periods of short-time work do not count towards acquiring leave entitlements, as established by the Court in the Heimann and Toltschin judgment. 36 The case concerned a situation where an employer had to dismiss workers due to financial difficulties. As part of a social plan, the workers received an allowance for one year after their dismissal, during which they did not work for the employer and did not receive wages. When their contracts ended, they requested an allowance in lieu of holidays accrued during the short-time period.
The Court ruled that its case law on sick leave does not apply to short-time working, as the two are fundamentally different. First, under the social plan, the reciprocal obligations of the employee and the employer were suspended. Second, short-time working under the social plan was foreseeable for the workers, who were free to rest or engage in recreational and leisure activities. Additionally, workers were not subject to physical or psychological constraints caused by illness. Third, if employers were required to pay for paid annual leave during the short-time period, they might be reluctant to agree to such social plans, thereby depriving workers of their positive effects, such as mitigating the effects of economic dismissals.
Unlawful dismissal and re-instatement
In the QH and CV cases, the application of the ‘unforeseeable’ and ‘beyond control’ criteria led to a notable outcome. 37 In the QH case, the employee was dismissed and, after four years, reinstated, when it was determined that her dismissal had been unlawful. When she was dismissed again shortly thereafter, she did not appeal but requested an allowance in lieu of annual leave for the past four years.
The Court argued that the situation in which an employee is not allowed to work owing to an unlawful dismissal is as a rule not foreseeable and beyond the worker's control. Therefore, the period between the unlawful dismissal and reinstatement must be treated as a period of actual work for the purpose of determining annual leave rights. For more on the carry-over period in this situation, see Section 4.4.
Overlap of annual leave with other rest periods
Another issue is the question of when the overlapping of rest periods is not allowed, meaning when rest periods can be deducted from annual leave days.
Maternity and sickness
For the Court, there were straightforward grounds in EU law to decide that maternity leave days cannot be deducted from annual leave days, in dispute in the Merino Gómez case. 38 The Court emphasised that EU law protects maternity leave as an absolute right under Article 8 of Directive 92/85, which permits no derogation or limitation. The purpose of maternity leave is to protect the mother's physical condition and enable her to care for her child, as also noted in Dicu (see Section 4.2). Since in this case the worker’s maternity leave coincided with her scheduled annual leave, the latter was denied. This was, the Court ruled, a violation of the absolute right to annual leave under Directive 93/104, necessitating measures to ensure the worker could take her full annual leave at another time.
The question of anti-overlapping is more difficult to answer in the case of sickness periods, as EU law does not regulate sick leave. In the Schultz-Hoff and Others judgment, referenced in Section 4.2, the Court addressed this issue for the first time. It noted that ‘it is common ground’ that the purpose of the entitlement to paid annual leave is to enable the worker to rest and to enjoy a period of relaxation and leisure, which differs from the purpose of sick leave, which is to enable recovery from illness. Given these differing purposes, the Court concluded that a worker on sick leave during a scheduled annual leave period has the right (but not the obligation) to take that leave at a time that does not coincide with the period of sick leave. 39 In later case law, it ruled that the scheduling of that new period of annual leave (corresponding to the duration of the overlap period) is subject to the rules and procedures of national law on leave. For example, if an employee's proposed period of annual leave conflicts with the organisation's business interests, the employer can propose an alternative period, which may fall in the following year. 40
Quarantine
Does this case law also apply to quarantine periods, such as those imposed to prevent the spread of the SARS-CoV-2 virus, during scheduled holidays? This question arose in the Sparkasse Südpfalz case, 41 when an employee requested to take the leave period corresponding to the quarantine overlap in the following year, but the employer refused. The Court recalled the criteria it had developed for sick leave, i.e., ‘beyond the worker's control’, ‘unforeseeable’ and ‘being subject to physical and psychological constraints’. Applying these criteria, the Court acknowledged that quarantine measures have a different purpose from annual leave, are unforeseeable and beyond the worker's control. However, it added that during annual leave, workers ‘must not be subject to any obligation vis-à-vis their employers which may prevent them from pursuing freely and without interruption their own interests in order to neutralise the effects of work on their safety or health’. Since in a quarantine situation employees do not have such obligations, the Court concluded that the employee in question was considered to have enjoyed his holiday, even if the quarantine period did not allow for relaxation and leisure as desired. The Court noted that the Directive does not guarantee that any event preventing workers from fully enjoying their holiday warrants additional leave.
Carry-over periods
The rules concerning carry-over periods are relevant both to the postponing of unused leave days to a period after the reference year and to the right to an allowance in lieu of unused leave upon termination of employment.
Regarding the transfer of leave days, the Court argued that while the positive effects of paid annual leave on the worker's safety and health are realised fully when taken in the current year, the significance of that rest period remains if taken later. 42
The power of Member States to regulate carry-over periods
In Schultz-Hoff and Others, the Court had to deal with the loss of unused holidays after the year in which they were acquired, while the employee concerned had been on sick leave during the relevant leave year. In its argument, the Court first (in point 37) referred ‘as a preliminary point’, to Recital 6 in the preamble of Directive 2003/88, from which it follows, as was noted in Section 4.2, that Member States cannot make the right to paid annual leave subject to a condition that the person actually worked during the leave year. The Court continued by arguing that a carry-over period basically aims to give a worker who has been unable take annual leave an additional opportunity to benefit from that leave. The laying down of such a period forms part of the conditions for the exercise and implementation of the right to paid annual leave and therefore falls, as a rule, within the competence of the Member States. It follows that Article 7(1) of the Directive does not preclude, in principle, national legislation which lays down conditions for the exercise of the right to paid annual leave, including even the loss of that right at the end of a leave year or of a carry-over period.
However, this power is subject to the condition that the worker must have actually had the opportunity to exercise the right conferred on him or her by the Directive. If sick leave lasts for the whole leave year and beyond the end of that year and/or of a carry-over period set by national law, the worker is denied any opportunity to benefit from annual leave. The principle established in BECTU - that Member States cannot impose preconditions on the existence of the right to leave, since otherwise the provision of the Directive concerned loses its effet utile - also applies to the loss of rights.
It should be noted that in this argument, the Court started by invoking Article 5(4) of Convention 132 (concerning the acquisition of holiday rights), but it did not refer to Article 9, which deals with the postponement of holidays (carry-over).
The Schultz-Hoff and Others case concerned the entitlement to an allowance in lieu of leave not taken. The Court held that the right to leave and the allowance are functionally identical under Article 7. The allowance ensures that the worker can financially afford to take annual leave, even after termination of employment, allowing him or her to rest before starting a new job. 43
In her Opinion in KHS, the Advocate-General concluded that the allowance in lieu ‘is not a general compensation, but a substitute for annual leave which can no longer be taken because of the termination of the employment relationship.’ 44
The case law according to which holiday rights are not lost if a person has been unable to take leave due to sickness applies regardless of the reason for termination; it could also be resignation, retirement, or dismissal, as the Court ruled in Maschek. 45 However, if sickness is not the reason for leave remaining untaken, the power of Member States to regulate carry-over periods is not restricted. Maschek, for instance, concerned a situation in which a worker, while still receiving his salary and not being ill, was required not to report to his place of work for a period preceding his retirement. Apparently, there was a labour conflict. In this case, the carry-over of unused leave days in as far as they were unrelated to sickness could be restricted by national law.
Carry-Over of accumulated rights acquired during consecutive years of sick leave
From Schultz-Hoff and Others, it could be inferred that there must be no limits on the carry-over period if an employee cannot take annual leave due to sickness. The acquired rights are not lost but become an allowance in lieu of annual leave. In the KHS case, 46 this conclusion was challenged; it concerned a case where an employee had been ill for several consecutive years. The question arose as to whether, in this case, the applicable collective labour agreement could restrict the carry-over of accumulated leave rights to 15 months after the start of the calendar year. After this period, the unused holiday entitlements lapsed.
The Advocate-General referred to the 18-month period in Article 9 of Convention 132, interpreting it as a maximum time limit after which leave entitlements expire. She concluded that while this period is sufficient to ensure the effective exercise of holiday entitlements, EU Member States are not obligated to observe this maximum period and can allow longer carry-over periods. 47
The Court argued that the conclusion from Schultz-Hoff and Others - that no limit must be set to the carry-over period for leave not taken due to sickness - ‘had to be qualified’. Otherwise, it could lead to an unlimited accumulation of annual leave entitlements acquired during periods of inactivity, which would ‘no longer reflect the dual purpose of the right to paid annual leave, which is enabling the worker both to rest from his work and enjoy a period of relaxation and leisure. When the carry-over exceeds a certain temporal limit, annual leave ceases to have its positive effect for the worker as a rest period and is merely a period of relaxation and leisure.’
The Court then discussed the question of whether a carry-over period of 15 months could reasonably be considered as a period after which paid annual leave no longer has a positive effect on the worker. It argued that a carry-over period must, inter alia, ensure that leave periods can be planned in advance and are available in the longer term. Therefore, the carry-over period must be substantially longer than the reference period for granting the leave. It must also protect the employer from the risk of excessive worker absences.
In addition, the Court referred to Article 9(1) of Convention 132, stating: ‘That rule may be construed as being based on the consideration that when the periods for which it provides expire the purpose of the leave entitlement may no longer be fully achieved. The calculation of the carry-over period should take into consideration the purpose of the right to annual leave as resulting from Article 9(1) of that Convention’. While thus establishing the purpose of Article 9 without explaining how this interpretation follows from the text, and ignoring the time limit mentioned in the Article itself, the Court held that: ‘It may reasonably be considered that a carry-over period of 15 months is not contrary to the purpose of that right’.
To summarise the case law: Member States have the competence to regulate carry-over periods even if this results in the loss of acquired rights. This competence is restricted when a worker has not been able to take annual leave due to sickness. However, in cases of accumulation of holiday entitlements during consecutive years of sick leave, the carry-over period can be limited to 15 months. 48
Carry-over periods when a worker is not given the opportunity to take leave or to work
Apart from sickness, there are other situations in which carry-over periods cannot be restricted. One such example is the King case, which concerned a worker who was unable to take leave for 13 years, because the employer did not facilitate it (as per the worker's contract, he was not paid when on leave). 49 The Court ruled that Mr. King's annual leave entitlements had not expired and could be claimed as an allowance in lieu of leave upon termination of his employment. While in KHS the Court ruled that the right to unlimited accumulation of entitlements would no longer reflect the purpose of paid annual leave, it now argued that the approach should be different: ‘any derogation from the right to annual leave is limited to what is strictly necessary in order to safeguard the interests which that derogation protects. In this case protection of the employer's interests does not seem strictly necessary, since the employer is not faced with periods of his absence because of sickness which would have led to difficulties in the organisation of work. An employer who does not allow a worker to exercise his right to paid annual leave must bear the consequences and thus there is no limit to the carry-over period’.
The Court did not reiterate its earlier argument from KHS, namely, that the purpose of annual leave is to recover from work, which does not justify the unrestricted accumulation of leave entitlements.
The argument here that the employer does not face organisational difficulties is remarkable, since this is generally true in cases of allowances paid in lieu of unused leave. Difficulties arise during sickness, when the worker has to be replaced, not when the employment contract is terminated. The real issue for employers in these cases is the cost of the allowance.
The outcome in King - that the employer cannot escape his obligations - is satisfactory, but the Court's reasoning is somewhat confusing.
The Court's approach, according to which entitlement to leave is not lost when an employer is at fault, is also evident in the QH and CV case (referenced in Section 4.2), 50 which concerned a worker who was reinstated following unlawful dismissal after more than four years of inactivity. The Court held that the intermediary period should count for the purposes of the acquisition of annual leave entitlement, as it was because of the acts of the employer that the employee could not work and exercise the right to paid annual leave. Therefore, unlike in cases of accumulated entitlements due to sickness periods, in this case there was no limit to the carry-over period as the employer had to bear the consequences of not allowing the worker to exercise the right to paid annual leave.
It is noteworthy that in this case the workers were not confronted with the argument that no physical or psychological constraints prevented them from taking leave during the period they did not work. It is also notable that in this situation, there was no interruption or suspension of the employment relationship, but rather a period between two employment relationships. 51 Still, this period counted for the purposes of the acquisition of annual leave rights.
‘Account should be taken of the ILO principles’
The meaning of principles in Recital 6
When addressing the question of whether Article 9 of Convention 132 is legally binding on EU Member States in her Opinion in KHS, the Advocate-General seemed to struggle with the meaning of the term ‘principles’ in Recital 6 of the Directive. 52 She concluded that ‘principles’ are rules that require that something be realised to the greatest legal and practical extent possible, but they are not legally binding. ‘Only the Union itself can determine the compatibility of EU legislation with ILO law’.
Indeed, there will be little disagreement on the statement that ILO principles are not compulsory for EU institutions. The term ‘principles’ in the Directive rather refers, as appears from the context and the phrase ‘take account of’ contained in the Recital, to basic concepts derived from ILO instruments. The EU institutions and Member States have the discretion to decide which principles to invoke.
In interpreting and applying these principles, it is important, on the one hand, to recognise that the EU context differs considerably from that of the ILO. ILO standards have a global scope of application and those relating to holidays are already quite old. On the other hand, as principles, they do not have to be ‘hard’ law, (i.e., found in Conventions) but can also be derived from recommendations.
Thus, within the EU context, some ILO principles may, after due consideration, be disregarded as being outdated or no longer useful. Principles can also be applied in a more stringent way, e.g., without conditions or reservations, than follows from the original text of. After all, welfare has grown since 1970, and within the EU the concept of annual leave has developed as a fundamental right.
A comparison of ILO principles and their application by the Court
Let us briefly outline the main differences between the Court's interpretations and the principles derived from the ILO standards on holiday rights.
According to Convention 132, periods of absence from work for reasons beyond the employee's control shall be counted as part of the period of service; Member States can determine the conditions under which this is done. Recommendation 98 adds that periods during which an employee receives wages should not affect entitlement to, or duration of, the right. In respect of interruptions of work referenced in Paragraph 7(3), countries can set conditions.
When referencing Article 5(4) of the Convention, the Court chose to omit the phrase ‘under the conditions of the Member States’. Instead, it held that during sick leave, holiday rights are acquired without time restrictions or other conditions. This approach strengthened the assimilation of sick leave periods with working periods beyond the requirements of the Convention.
Such application of ILO principles may certainly be justified, as the right to annual leave is an important social right that should not be subject to conditions undermining it.
However, in KHS, the Court faced the undesirable consequence of its approach in cases of consecutive years of sickness. It mitigated this by allowing limits to be placed on carry-over periods. This deviation from ILO principles on the non-expiry of holiday rights may, however, lead to unpredictable outcomes, as the duration of periods sickness can be difficult to predict, and the effects of the rules on the carry-over period can therefore be unpredictable. It also raises new questions, such as how to handle carry-over periods after successive periods of maternity leave, sick leave and other leave eventually ending in dismissal.
The Court has developed various criteria to distinguish between sickness and other periods of inactivity for the purposes of acquiring rights and anti-overlapping. From Article 5(4) of the Convention it derived the criterion ‘beyond control of the employed person’, but this proved insufficient in some situations. Through piecemeal development of criteria (‘unforeseen’; ‘hindered by physical and psychological constraints’; and ‘the interests of the employer’) the Court has attempted to address other periods of inactivity. However, applying these criteria can lead to confusing outcomes, as they are not consistently applied. For example, in QH and CV, why was it not considered relevant that the employee was not psychologically or physically prevented from taking holidays during the four years between employment relationships?
The principles on postponing annual leave and the expiry of entitlements also differ between the ILO and the Court. Article 9 of Convention 132 states that holidays should preferably be taken in the year they are acquired, but in any case, within 18 months from the end of the year in respect of which the entitlement has arisen. It does not provide any detail on the consequences if this period is exceeded. 53
However, the Court has interpreted Article 9 as allowing for the loss of holiday entitlements after the carry-over period expires. It did not explain in KHS why it accepts a shorter carry-over period than the 18 months mentioned in Article 9.
This analysis shows that the Court has not wholeheartedly embraced the ILO principles. It seems to use them to support the interpretation it already has in mind rather than considering the precise text and meaning of these provisions.
Conclusions
The right to annual leave is a unique fundamental social right. Unlike other fundamental social rights that impose positive obligations on Member States, such as ensuring a decent income, which are often vaguely worded, the provisions on the right to annual leave explicitly specify a minimum duration.
This right is characteristically developed through a ‘bottom-up’ approach, primarily via collective labour agreements. ILO standards, for instance, have historically been based on surveys of practices across countries. Consequently, these standards have been shaped less by normative considerations and more by economic growth and productivity trends. For example, there is no compelling rationale as to why six days of annual leave were deemed sufficient in 1936, three weeks’ leave were sufficient in 1970, and four weeks’ leave were provided for in the 1993 Directive.
Within the EU, supranational intervention in annual leave regulation was justified not only to improve worker health and safety but also to ensure that employees benefited from advancements in working and living conditions (Section 3.1).
Supranational standards mandating concrete redistribution of welfare have faced significant resistance. Disparities in welfare growth between nations, coupled with divergent views on distributing increased prosperity, have complicated such efforts. The debates during the drafting of ILO Convention 132 exemplify this tension (Section 2.2).
The Court of Justice, while acknowledging that the purpose of annual leave includes ensuring rest and leisure time is provided, has also not linked legal consequences to the latter. Instead, it has interpreted leisure solely as a means to achieve the primary goal of rest (KHS).
The Court's choice of health and safety as the sole purpose of the right to annual leave for justifying restrictions of Member States’ powers under Article 7 of the Directive (which allows national rules on entitlement to and granting of annual leave) is understandable. In BECTU, the Court invoked the effet utile principle for this justification, but in subsequent rulings apparently it did not find this strong enough to justify restrictions on the powers of Member States to regulate the calculation, overlapping and loss of annual leave entitlements in case of periods of sickness.
However, while the Court may have felt compelled to invoke the health and safety justification in respect of restrictions on the powers of the Member States, it is neither necessary nor convincing to conclude that it is the sole purpose of annual leave in all situations. The initial legal basis for the Directive, and the Directive as the basis for the right to annual leave, provided scope to the Court to restrict Member States’ powers, but did not restrict, by definition, the possibilities for the Court to interpret the right. Moreover, the argument based on the purpose of the annual right to protect health and safety was adopted under the 2003 Directive, which has a general legal basis (Article 137(2) EC). Thus, the Court had the freedom to develop also a broader approach and are there no reasons based on the legal basis of the Directive for not following the ILO principles.
Annual leave entitlements also constitute accrued rights under an employment relationship. This concept emerged early in the codification of annual leave rights within both the ILO and EU frameworks. Interpreting holiday entitlements as acquired rights better explains certain rulings. For instance, consider a worker whose employment is terminated after prolonged illness, leaving him or her unable to seek new work. If the purpose of annual leave were solely to provide rest from work, why should this worker retain unused leave entitlements? Framing leave also as an acquired right clarifies that such entitlements are not forfeited.
Similarly, the outcomes in King and QH and CV align more logically with the notion of protecting acquired rights—particularly when employers fail to fulfil obligations—than with health and safety arguments.
The Court's restrictions on accumulating leave during periods of prolonged sickness (KHS)—arguing that extended leave periods lose their restorative purpose—raise questions. If a worker leaves employment without having worked, is this rationale persuasive? A more coherent argument is that leave entitlements, as employment-based benefits, may be restricted when an individual does not work for extended periods.
Applying ILO principles on annual leave could foster more consistent approaches and better protect acquired entitlements. While this article does not propose a comprehensive system, the following adjusted principles—aligned with the EU's fundamental rights framework—may stimulate reflection: according to this proposition annual leave entitlements (particularly those linked to work periods or periods during which wages are paid) are not forfeited. Periods of inactivity during employment during which no wage is paid count toward leave entitlements, but Member States may impose conditions on qualifying durations. Such conditions must not undermine the right to annual leave (BECTU, KHS). For example, if sickness-related inactivity qualifies for at least the reference period's duration, this condition seems to be fulfilled.
This system does not mention uniform criteria for having periods of inactivity count towards the calculation of annual leave days and for anti-overlapping, given the complexity of defining them. 54 It thus accommodates more situations than ILO Convention 132, but aligns with Recommendation 98, which recognises several interruptions that are relevant to leave accrual.
The proposed approach and current EU rules may yield similar outcomes in many cases. Under EU law, pre-sickness leave entitlements may expire after a carry-over period, but new entitlements accrue during periods of sickness—effectively shifting claimable leave periods. Under the ILO-based proposition, workers on sick leave do not accumulate leave without limits, but rights earned during work periods remain intact. This enhances legal clarity: workers and employers know when entitlements accrue and how many untaken days remain, avoiding complexities linked to the uncertain nature of periods of illness (Section 5).
EU Member States may argue that limiting carry-over periods is necessary to enforce the taking of leave and prevent large pay-outs for unused leave. However, Article 10 of ILO Convention 132 allows employers to designate leave periods (under certain conditions), ensuring employees take leave annually and reducing terminal allowances. EU Member States likely have such mechanisms in place. However, the primary objective of this rule is that the employee actually takes his or her leave in the year when it is acquired.
The ILO principles also recognise annual leave as a period of leisure and relaxation—a right earned by workers, and not merely a health measure. Unlimited carry-over for contract-based entitlements strengthens the protection of these rights. This approach better explains the rulings in cases such as King (where the purpose of health falters) and the granting of posthumous allowances in lieu of annual leave to heirs of a worker (Bauer and Broßonn). 55
Now that the right to annual leave has been acknowledged as a fundamental social right in the EU Charter, the time may have come to develop further rules. While the time might not have been ripe for doing so when the Directives were drafted, things are different now, in light of the extensive case law of the Court. Perhaps a proper examination of the ILO principles may be helpful for this exercise.
Footnotes
Declaration of conflicting interests
The author declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.
Funding
The author received no financial support for the research, authorship, and/or publication of this article.
