In two joined cases, Stadt Wuppertal v Bauer and Willmeroth v Broßonn (C-569/16 and C-570/16), the European Court of Justice (ECJ) had to decide whether the widow of a deceased worker was entitled to an allowance in lieu of paid annual leave not taken by the worker.
The late husbands of Mrs Bauer and Mrs Broßonn were employed by the city of Wuppertal and Mr Willmeroth respectively. Their husbands had not taken all of their paid annual leave before their deaths. Mrs Bauer and Mrs Broßonn were the sole heirs to their husbands' estates and asked their husbands' former employers for an allowance in lieu of accrued holiday. Both employers refused to pay, on the basis that German law provided for the right to paid annual leave to lapse on the worker's death so it could not form part of the worker's estate. Mrs Bauer and Mrs Broßonn brought claims in the German labour court.
German Labour Court decisions
The two claims were allowed by the German Labour Court. The employers appealed and the Higher Labour Court rejected their appeals. The employers then appealed to the Federal Labour Court.
The Federal Labour Court made a request to the ECJ for a preliminary ruling and asked the ECJ to interpret the Working Time Directive, noting that the ECJ decided in 2014 in Bollacke v K + K Klass & Kock BV and Co KG (C-118/13) that a worker's right to paid annual leave does not lapse on his death. However, it was uncertain whether that was also the case where national law (such as German law) precluded an allowance in lieu from forming part of the estate. It expressed the view that the purpose of the right to paid annual leave – to allow the worker to rest and enjoy a period of relaxation and leisure – could no longer be achieved where the worker had died.
European Court of Justice decision
The ECJ confirmed that, under EU law, a worker's right to paid annual leave does not lapse on his death. The reason for which the employment relationship is terminated is not relevant as regards the entitlement to an allowance in lieu. In addition, the legal heirs of a deceased worker can claim an allowance in lieu of the paid annual leave not taken by the worker. If national law prevents that happening, it is incompatible with EU law and the heirs can rely directly on EU law against both public and private sector employers.
The ECJ stated that the right to paid annual leave is an essential principle of EU social law and is expressly affirmed as a fundamental right in the Charter of Fundamental Rights of the European Union. This right is both mandatory and unconditional in nature. This fundamental right includes the right to be paid during such leave, together with the right to receive an allowance in lieu of annual leave not taken when the employment relationship is terminated. This financial aspect forms part of the assets of the worker concerned, and therefore passes to his legal heirs by inheritance on his death.
It seems very harsh that an employer would refuse to make a payment in lieu of accrued holiday entitlement to a deceased worker's heirs but this was permitted under German law.
For any employers who were in doubt, the ECJ decision makes it crystal clear that they must pay accrued holiday pay to the estate of a worker who has died. It goes without saying that any outstanding pay must also be paid to the worker's estate. In this situation, employers should also process any life assurance benefits and dependants' pensions quickly.