What happens to accumulated vacation entitlements when switching from full to part-time work?

On June 11, 2014 the Higher Labour Court of Lower Saxony (Landesarbeitsgericht – LAG) dealt with the disadvantageous recalculation of unused accrued annual vacation when switching from full-time to part-time work. In accordance with a recent decision by the European Court of Justice (ECJ), the court held that when employees change their working hours from full-time to part-time, the amount of vacation not taken may not be adjusted in such a way that the accumulated paid vacation is reduced proportionally to the new working hours.

The employee was employed full-time under an employment contract entered into in 2009. In 2010, she became pregnant and because of (obligatory) absence during her pregnancy, maternity leave and later, parental leave, she did not work for most of 2010 and 2011. The employee and her employer agreed that she would switch from working full-time to working part-time (3 days per week), starting on 22 December 2011 after the end of her parental leave. During the prohibition to work, the employee accumulated 29 days of paid annual vacation.

However, the employer calculated the outstanding vacation entitlement differently when the employee returned to work part-time. The employer argued that the entitlement to vacation already accumulated by the employee must be adjusted proportionally to the relationship between the new and the old number of days worked. According to the employer, the employee was only entitled to a remaining vacation of 17 days (namely 29 days divided by 5 days multiplied by 3 days, that is a total of 17.4 days, rounded down to 17 days) thereby using a formula applied by the German Federal Labourt Court (Bundesarbeitsgericht – BAG) in case law. The employer argued that such a calculation of days of vacation pro rata to the days worked had a neutral effect on the amount of vacation to which the employee is entitled since the number of weeks of leave remained unchanged. The employee considered this formula to be discriminatory against part-time employees.

The German court of first instance asked the ECJ a preliminary question about the compatibility of the German formula with the EU Framework Agreement on Part-time Work. The ECJ held on 13 June 2013 (case number C-415/12) that the outstanding paid annual vacation accrued by a full-time employee should not be reduced proportionally when changing to part-time work. Indeed, the fact that a part-time employee who normally works three full days per week is, during a particular week, absent from work does not in any way imply that the employee would thus obtain the equivalent of five days of leave. Leave accumulated when working full-time must clearly be understood as five complete days during which the employee is relieved from his obligation to work. Subsequently, if an employee working three days a week as one week of leave, this means that the employee is being released from his obligation to work for (only) three days. It is thus necessary to distinguish between the period of rest through taking actual leave and normal professional inactivity within a period during which the employee is contractually not obligated to work. The Higher Labour Court of Lower Saxony followed this reasoning of the ECJ and granted the employee the full outstanding 29 days of vacation.

Employers should be aware that the amount of accumulated vacation days is not reduced when full-time employees reduce their working time. The employees are thus able to stay away from work for a longer period of time.

The court has allowed the appeal to the Federal Labour Court. It remains to be seen whether the Federal Labour Court follows this reasoning. We will keep you posted!