After a successful trial, a well-deserved vacation
At first glance my November editorial might appear to be a description of the ideal scenario of how an attorney is rewarded for successfully representing a client in litigation, but it isn’t. On the contrary, I’d like to briefly discuss a recent CJEU judgment that is likely to furrow the brows of attorneys (and even more so) clients. And relaxing on our vacations probably won’t help much.
In Judgment C-57/22 of 12 October 2023, the CJEU addressed a specific preliminary question raised by the Czech Supreme Court, which in the original Czech court proceedings dealt with a dispute between an employee and her employer over the validity of a dismissal. The factual situation at issue was as follows: in the Czech courts, the employee challenged a notice of termination served by her employer in October 2013. After the competent court ruled that the dismissal was invalid, the employee returned to work in January 2017 under her original employment contract. It is relevant to the present case that, although the employee notified her employer in writing that she wished to continue working after challenging the validity of her termination, the employer did not assign her any work between January 2014 and January 2017.
Following her re-employment, the employee applied to the employer for leave to which she should have been entitled for the duration of the litigation, the period of three years from January 2014 to January 2017. The employer did not comply with this request on the grounds that the employee had not worked during the period of the litigation. The attentive reader may already have guessed the point of this story. Despite her employer’s refusal, the employee failed to attend work on the days for which she had requested leave in July 2017, and her employer dismissed her in August 2017 for unexcused absences. The employee subsequently sued the employer for back pay for vacation time accrued during the previous litigation. This new dispute over the payment of wage compensation reached the Czech Supreme Court, which subsequently referred the matter to the CJEU for a preliminary ruling.
In particular, the Czech Supreme Court asked the CJEU to interpret Article 7(1) of Directive 2003/88/EC on certain aspects of working time. According to this Article of the Directive, the following shall apply: “Member States shall take the necessary measures to ensure that every worker is entitled to paid annual leave of not less than four weeks in accordance with the conditions for obtaining and granting such leave laid down by national law or practice.” In its inquiry, the Supreme Court stated that under Czech law, an unlawfully dismissed employee who, without undue delay, notifies his/her employer in writing that he/she insists on continuing to be employed, is entitled to wage compensation in the amount of average earnings from the date of such notification to the employer until the employer allows him/her to continue working or the employment relationship is validly terminated.
In layman’s terms, the Czech Supreme Court asked the CJEU whether the payment of wage compensation for the entire duration of the dispute is not sufficient protection for an unlawfully dismissed employee who did not actually work for the employer during that time. This distinguishes the Czech legislation from, for example, the Bulgarian legislation, which was the subject of another CJEU decision on working time and vacation entitlements, to which the CJEU has referred extensively in its case law.
In the judgment in question, the CJEU went into some detail in assessing the objectives and legal context of the provision of the minimum holiday entitlement in Article 7(1) of the Directive. As might be expected, it held that the entitlement to paid annual leave could not be interpreted restrictively, since the employee must be regarded as the weaker party to the employment relationship, so it was necessary to prevent the employer from being able to restrict his/her rights. The CJEU stated that annual leave is primarily intended to allow employees to take a break from their work tasks and to provide time for relaxation and non-work interests. However, it went on to add that, though this purpose of leave is linked to the fact that the employee has actually performed some work, in certain specific situations entitlement to paid leave cannot be linked to a condition of actual work performance. One of these specific situations is wrongful dismissal, where the employee was unable to work as a result of the employer’s wrongful conduct.
It also follows from CJEU case law that the Court considers the entitlement to leave and the entitlement to pay for taking such leave to be two components of a single entitlement. The purpose of the requirement to grant pay in lieu of leave is to place the worker on leave in a situation which, in terms of pay, is comparable to the period during which he/she works. This concept of two components of one entitlement also implies that the entitlement to annual leave includes, in addition to the entitlement to wage compensation for the period of leave taken, the entitlement to financial compensation for leave not taken on termination of employment. For this reason, the CJEU did not accept the reasoning of the Czech Supreme Court that wage compensation for the duration of the litigation is the only claim sufficiently protecting the unlawfully dismissed employee. This conclusion is a reversal of the existing decision-making practice of the Czech courts, as is evident from the argumentative position taken by the Czech Supreme Court in the proceedings before the CJEU.
What are the practical implications of this new CJEU judgment for us? When discussing with clients how to handle terminations, I sometimes feel a little inadequate when one of my main pieces of advice is “it’s best to resolve the situation by agreement”. Really valuable advice from a specialist, you might say. However, in situations where the grounds for termination are not “crystal clear”, it is my practical experience with termination disputes, where the Czech courts have been very consistent in protecting the employee as the weaker party to the employment relationship, that leads me to this advice. The conclusions of the recent CJEU judgment described above may then be an additional motivation to look for room for agreement. In fact, a possible failure in a dispute over the validity of a termination notice may be even more expensive than the case law of the Czech courts has so far indicated. The employer will not only pay wage replacement for the entire period of the dispute, which often lasts several years, but also full vacation pay for each year in addition.
