Short-time working and holiday pay

Hein v Albert Holzkamm GmbH & Co KG

Whilst periods of short-time working may reduce the minimum period of statutory leave to less than four weeks, they cannot reduce the amount off pay due when leave is taken – and overtime doesn’t necessarily have to be included in the calculation of holiday pay.

Background

This case related to a construction worker in Germany working under a collective agreement which stated that although a worker continued to accrue holiday pay even during periods of short-term working, holiday pay was calculated on the basis of a 13-week average (as provided for under German law). After a 26-week layoff, Mr Hein’s holiday pay was calculated on this basis, excluding his overtime, with the result that it was lower than his normal pay.

ECJ decision

The ECJ made the point that if the contract had provided that holiday pay only accrues during periods of work, and not during periods when the worker is not working, this would have been compatible with EU law. However, the contract provided that holiday pay continued to accrue during periods when the worker was not working. The way in which this was reflected was to adjust the holiday pay calculation and such a practice, said the ECJ, breached EU law in respect of pay for the 4 weeks’ paid leave guaranteed by EU law. As such, the German law 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, as regards overtime, the ECJ said that pay received for overtime work need not be taken into account in calculating holiday pay unless the obligations arising from the employment contract require the worker to work overtime on a broadly regular and predictable basis, and the corresponding pay constitutes a significant element of the total remuneration that the worker receives for his professional activity.

Link to judgment: https://www.bailii.org/eu/cases/EUECJ/2018/C38517.html

Comment

The ECJ’s comments on overtime suggest that employers might not have to factor pay for overtime into holiday pay calculations unless the worker is contractually obliged to work overtime. This could be seen as casting doubt on EAT authority that pay for voluntary overtime must be factored in to holiday pay provided it is paid over a sufficient period of time on a regular or recurring basis. We may get further clarity on this when the Court of Appeal hears the appeal this year in Flowers v East of England Ambulance Trust.