Steve Peers

Death is inevitable, and sadly, it can occur during an individual’s working years, before they can retire. This leads to the question: can employment rights be passed down as inheritance?

EU law doesn’t dictate the specifics of inheritance laws within individual member states. However, it comes into play when inheritance involves cross-border elements like taxation (impacting the free movement of capital) or the choice of applicable law and jurisdiction, governed by a regulation effective from 2015.

While EU law addresses various employment rights, it lacks provisions regarding inheritance. However, the Court of Justice of the European Union (CJEU) recently determined that at least the right to annual leave, as per the Working Time Directive, is inheritable.

The judgment

Article 7(1) of the Working Time Directive grants every worker a minimum of four weeks of paid leave annually, subject to national regulations. Article 7(2) clarifies that this minimum cannot be substituted with a payment unless the employment relationship ends.

Prior CJEU rulings, such as Schultz-Hoff and Stringer, affirmed that when illness prevents workers from using their annual leave, the four-week paid leave entitlement under the Directive must be carried over. In the Bollacke case, a worker passed away after a prolonged illness, leaving 140 days of accrued leave. His wife, being his sole heir, claimed inheritance of this entitlement.

Though German law implementing the Directive was silent on inheriting unused holiday pay, higher courts ruled against it. This led a lower court to seek the CJEU’s interpretation of the Directive.

The CJEU concluded that the allowance was inheritable. It emphasized that paid holiday is a fundamental principle of EU social law, allowing no exceptions. Importantly, it stated that holiday time and its corresponding payment are inseparable components of a single right. Furthermore, Article 7(2) of the Directive solely stipulates employment termination and accrued holiday pay as conditions. Finally, inheriting accrued holiday pay was deemed essential to uphold the right’s effectiveness, preventing its unintended forfeiture due to circumstances beyond the worker’s or employer’s control.

The national court also inquired whether a prior application by the worker was necessary to receive back pay. The CJEU reiterated that Article 7(2) doesn’t impose additional conditions, making such a requirement invalid.

Comments

The CJEU’s judgment could influence the interpretation of other EU employment laws and even broader EU legislation. While specific to the Working Time Directive, it suggests that rights under other EU employment laws might also be inheritable. This reasoning is particularly relevant for back pay under the Directive on insolvent employers and compensation for violations of EU health and safety regulations, considering the Working Time Directive falls within this legislation and a worker’s death might stem from such breaches.

The Court’s focus on legislative effectiveness holds broader implications. This argument might extend to areas like compensation for breaches of EU non-discrimination laws and consumer law, particularly when a breach, like one of the Product Liability Directive, directly results in death.

Regarding the Working Time Directive, the CJEU’s emphasis on no additional conditions for accrued holiday pay means it must be granted not only upon routine employment termination (redundancy, retirement, resignation) but also in cases of dismissal for cause. This might unsettle employers dealing with less-than-diligent workers or raise public concerns when an employee commits workplace violence.

The Court’s reference to death as an “unintended consequence” beyond the worker’s and employer’s control is unclear, implying potential exceptions to payable accrued holiday pay upon death. Situations like suicide or employer-caused death logically should still warrant back pay, especially in the latter scenario.

Enforcement of this judgment hinges on its origin. Since the issue arose from national case law, not legislation, “indirect effect” can address it, with national courts interpreting national law in line with the Directive. In states where laws explicitly restrict holiday pay inheritance, the Directive directly applies to public sector employers but not private ones.

In such cases, workers’ heirs would need to seek compensation from the state based on the Francovich judgment, unless Article 31 of the EU Charter of Rights could suspend the national law. While the AMS judgment recently clarified the Charter’s applicability against employers indirectly, the Advocate-General in the Fennoll opinion rejected this for Article 31. It remains to be seen whether the Court will uphold this analysis, especially since the recent judgment omits any mention of the Charter.

The Court’s ruling against requiring a prior application for accrued holiday pay is logical if such pay is inheritable. Expecting a seriously ill employee to make such a claim is unreasonable, and it’s impossible in cases of sudden death.

This brings us to the core issue: is inheriting accrued holiday pay logical? While the judgment sidesteps this, previous cases like Lock stressed the importance of workers receiving full holiday pay to encourage taking leave for rest and health, as per the Directive. However, deceased workers clearly cannot benefit from this rest. Despite emphasizing the connection between pay and leave, the Court now insists on their separability.

Furthermore, the Court disregards Article 7(1)’s reference to national conditions for holiday pay eligibility and granting. While precedents acknowledge potential limits on carrying over holiday pay and claiming accrued pay upon employment termination, the Court ignores them (e.g., the KHS judgment) here.

Therefore, the Court’s judgment isn’t entirely convincing concerning the Directive’s wording and intent. It also lacks clarity in its reasoning compared to previous case law.

However, most would agree that individuals like Mrs. Bollacke deserve a small inheritance after their loss. The judgment’s impact on employers will likely be minimal, as most workers reach retirement age. This ruling finds justification within the broader employer-worker relationship, preventing employers from delaying proceedings for terminally ill employees, hoping the claim expires with the worker.

Barnard & Peers: chapter 20