Gülay Bollacke v K+K Klaas & Kock B.V. & Co. KG
There is a long running series of cases in the European Court and higher UK Courts concerning rights to sick pay and pay for holiday which an employee accrues but does not take because they are ill. This case is influenced by those points, but is primarily about German practice where an employee dies with accrued but untaken pay in lieu of holiday.
It holds that the employee's estate is entitled to pay for accrued but untaken holiday – in this case at least for 140.5 days. It reinforces common understanding among UK employers, but where employers have not been paying a worker's estate pay in lieu of untaken holiday, they should now do so.
Employers might want also to consider their understanding of rights on the death of an employee e.g. during a notice period or period after signing a Settlement Agreement.
The employee, B, was seriously ill from 2009 and was unable to work more than 8 months in that calendar year. He was again unable to work from 11 October until his death on 19 November 2010. He had accrued, but not taken, 140.5 days annual leave. The circumstances as to how this arose are not reported.
Under case law of the German Federal Labour Court, it has been held that a right to pay of accrued annual leave is terminated by the death of an employee. The Court of Justice of the European Union was asked to consider three questions:
- is national practice which means entitlement to paid leave or to pay in lieu of it which is lost on death precluded under European law?
- Is the entitlement to pay in lieu of leave on termination of employment personal to the worker, because it is intended to enable him to realise the benefit of pay for rest and leisure after employment terminates?
- Is an employer obliged to ensure the worker is actually granted leave by the end of the calendar year (or, at the latest, by the end of the applicable carry over period for holiday years) whether or not the worker has requested leave? (In other words, must the employer make it happen to ensure that leave is actually taken?)
The Court held that death cannot relieve an employer of the obligation to pay in lieu. It also held that the right does not need to be triggered by a request by the worker while alive for that payment, because otherwise it can be lost inadvertently.
It did not directly answer the second question above though its views are clear from the answers given. There was no answer to the third question, probably because it is not directly relevant to the facts of the case and the Court has dealt a lot with working time and holiday issues recently.
What to take away
For a UK employer, the apparent existence of a practice in Germany whereby pay in lieu was not paid out to the estates of workers is somewhat surprising. From our experience it is generally understood that pay in lieu of accrued but untaken holiday would be paid by employers to a deceased estate.
Existing European guidance in relation to wider treatment of holiday during sickness is not changed by this case.
The case might prompt employers to review what their arrangements are for dealing with bereavements, including practice for notifying families, dealing with workers' effects, and the review of arrangements for leavers who are subject to a long notice period, perhaps on garden leave or under an extended exit period with a Settlement Agreement.
It is increasingly common to specify what happens if a worker dies during the period prior to the ultimate termination date, but after signing a Settlement Agreement. Some employers may be concerned to avoid "double recovery" e.g. of death benefit and the settlement payments. Others may be concerned to deal with payment for specific actions yet to be performed by the employee.