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Pro rata holiday pay for zero-hours contracts

In Heimann and anor v Kaiser GmbH the ECJ held that calculating the paid annual leave of workers on short-time working on a pro rata basis did not breach EU law.

The claimants were employed on zero-hours, short-time working, contracts. When their employment ended, they claimed compensation for annual leave not taken in the previous two years. The employer argued that as zero- hours workers, they had accrued no right to paid annual leave. A German court, however, envisaged applying the pro rata principle and asked the ECJ whether a rule, that paid annual leave only accrues in respect of periods when workers had actually worked, would comply with the EU Working Time Directive. The ECJ held that case law requiring the accrual of paid annual leave in full while on sick leave could not be applied to the fundamentally different situation of a worker on short-time working. The short-time working agreement had suspended the employee's obligation to work and the employer's obligation to pay. Although formally employed on full-time contracts, short-time workers were in a comparable situation with part-time workers. Previous ECJ case law confirmed that use of the pro rata rule was justified on objective grounds in respect of part-time workers. Therefore employers were not prevented from calculating the paid annual leave of workers on short-time working on a pro rata basis.

Comment: With more and more employers turning to zero hours contracts to save money and provide flexibility, this ruling from the ECJ will come as welcome clarification as to the principles that can be adopted when calculating paid annual leave so as not to fall foul of working time legislation.

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