When are workers entitled to compensation for unused annual leave?
The Charter of Fundamental Rights of the European Union (Charter) and Directive 2003/88/EC of the European Parliament and of the Council of 4 November 2003 concerning certain aspects of the organisation of working time (Directive), which was transposed into the Slovene legal system through Article 164 of the Employment Relationship Act (ERA-1) stipulates that the right to annual leave is one of the core social rights, intended to provide workers with actual rest time and effective health and safety in the workplace. The employer must provide workers annual leave in the legally prescribed minimum duration and afford workers the opportunity to take annual leave days. Where workers do not avail of their annual leave days and the employment relationship is terminated, they are entitled to compensation.
Compensation eligibility criteria: (i) the employment relationship has been terminated and (ii) the worker has not, up to the day of the termination of the employment relationship, taken the entirety of the paid annual leave he was entitled to – these conditions derive from the Directive, the Charter and from the case law of the Court of Justice of the European Union (CJEU). Up to now, Slovene case law and theory deemed the following as compensation qualifying cases: (i) inability to work; (ii) availing of other forms of statutory leave (e.g. maternity leave); or (iii) inability to take their annual leave because of some other objective reason or unforeseen circumstances. CJEU has expanded its (already established) case law by way of its latest judgments, C-684/16 and C-619/16, which concern when and up to what point a worker is entitled to compensation.
According to the CJEU, a worker can only lose this right if they actually had an opportunity to use their remaining annual leave days before the termination of the employment relationship but did not exercise this right at their own discretion. CJEU has explicitly emphasised that a worker cannot lose this right just because they did not apply for it, as the employer is primarily the party that needs to grant a worker the opportunity to take their annual leave days and instruct them on possible consequences, should they not take his annual leave. Additionally, CJEU emphasises that a worker cannot lose the right to compensation if their employment relationship is terminated because of their death; in this case, the compensation may be claimed after their death by relatives.
It is, therefore, necessary to emphasise that employers are expected to always instruct workers to take all remaining annual leave days before the employment relationship is terminated and also actually grant workers the opportunity to take them. If an employer does not actually grant its workers the opportunity or if workers do not take their remaining leave days because of the objective reasons mentioned above, then the workers are entitled to compensation, which is covered by the employer.
As a result, it is essential that employers take all necessary precautions, as it is the employer that must prove that the worker was afforded the opportunity to take (the remainder of) their paid annual leave days and that the worker has not taken them at his own discretion and in full awareness.
