Annual leave allowance for zero-hours workers

The German case of Heimann and anor v Kaiser GmbH has recently clarified a vexing issue for employers: that the annual leave allowance for short-time workers should be calculated on a pro rata basis, as if the worker was a part time worker.

Two workers were dismissed by their employer, Kaiser GmbH, after it experienced financial difficulties. The employer later agreed to extend the workers contracts on a zero hours short-time working basis with no requirement for them to work and no requirement for the employer to pay a salary. The workers also received an allowance (similar to guarantee payments in the UK) from the German Government pursuant to a social plan entered into between the employer and its work council. When the workers employment ended they made a claim in the German Labour Court for untaken annual leave during their short-time working contract.

The Court made reference to the ECJ, specifically on the question of whether EU law precluded national legislation or practice (such as a social plan) and whether applying the pro rata rule to calculate annual leave for short-time workers was compatible with the EU Working Time Directive.

The ECJ held that workers who were placed on short-time contracts as a result of a social plan were different to workers who were unable to work due to illness and who continue to accrue paid annual leave during the period they are on sick leave.  The ECJ found that workers placed on short-time working contracts were not subject to any physical or psychological restraints caused by illness therefore should be likened to part time workers. It was held that the Working Time Directive did not preclude national legislation or practices requiring short-time workers holiday pay to be calculated pro-rata to the amount of days worked.

This decision confirms that holiday pay for zero hours workers can be calculated with reference to the hours actually worked and if the worker does not complete any hours due to lack of work in a relevant holiday year, holiday pay can be reduced to zero.

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