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Short-time work and leave

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According to figures published this week, 7.3 million employees are currently working short-time. Even though some companies gradually restart or increase their activities, it is not possible to predict whether the situation will change significantly in the near future. At the same time, holiday season and thus vacation time is approaching throughout Germany. Many employees have already applied for leave during the summer months before the start of short-time work. Some others will certainly follow at short notice.

Therefore, in practice, the following question arises: What will be the impact of short-time work on leave?

Is the employer allowed to or should it grant leave during the period of short-time work?

In answering this question, it is necessary to differentiate between the social and labour law perspective:

Social law

From a social law perspective, leave generally takes precedence over short-time work since one of the prerequisites for receiving short-time allowance is that work loss was inevitable (§ 96.1 page 1 sentence 1 no. 3 SGB III (Social Security Code)). However, work loss is evitable if recreational holiday can be granted.

Therefore, even during short-time work, the employer must generally approve and grant leave applied for by the employee, assuming, of course, that a leave entitlement still exists. Only if leave of other employees has priority, the employer may decline the employee’s requested leave. If the employer does not grant leave, it may risk that no short-time allowance will be granted, or that short-time allowance already paid by the Employment Agency must be refunded.

Labour Law

From a labour law perspective, the employer can grant leave as usual for days on which work is compulsory during short-time work.

However, there is an exception regarding Kurzarbeit Null (short-time work where work is temporarily suspended completely). In case of Kurzarbeit Null, the employee is fully released from his/her obligation to work. Hence, there is no possibility of release from the obligation to work by granting leave.

In the case of the introduction of Kurzarbeit Null based on a company agreement, the Federal Labour Court (BAG) decided (judgment dated 16.12.2008, case no. 9 AZR 164/08) that the employer cannot effectively grant leave during days of Kurzarbeit Null if the ratio between short-time work and leave is not expressly regulated in the company agreement. According to the judges, the company agreement must lay down that the employee will be exempt from short-time work for the duration of his/her leave in order to facilitate an effective granting of the leave. According to the BAG, the employee can demand that his/her leave be granted at a later date if the ratio between short-time work and leave is not regulated. Because of the aforementioned judgment, it is therefore recommended in companies to expressly regulate the ratio between short-time work and leave with a works council in order to reduce the risk for the employer to be obliged to grant the leave at a later date.

So far, it is still unclear how to proceed in case of companies without works council in view of the aforementioned case law regarding Kurzarbeit Null. If the employer unilaterally introduces short-time work on the basis of contractually reserved regulations, it can be clarified in the context of this ruling that the employee will be exempted from short-time work for the duration of his/her leave. Alternatively, it can also be clarified with the granting of the leave. If Kurzarbeit Null is introduced by means of a consensual agreement, this agreement can include a section regulating that leave takes precedence over short-time work. Since no final judicial decision has been delivered, there remains a risk that the measures taken are not sufficient and that, in spite of all, employers cannot effectively grant leave during Kurzarbeit Null.
In practice, anyway, the risk might be controllable – depending on the duration of short-time work -, if the leave entitlement is reduced for the duration of short-time work.

What will be the consequences of short-time work for the amount of the leave entitlement? 

Short-time work does not affect the amount of the leave entitlement if the number of working days is not reduced during short-time work. Since the calculation of leave entitlement does not depend on the reduced working time, but on the number of working days. If an employee works five days a week before and during short-time work, his/her leave entitlement stays the same.

If the number of working days changes during the period of short-time work, the following applies:

The European Court of Justice (ECJ) equates employees working short-time with employees temporarily working part-time (judgment dated 8.11.2012 – C-229/11). Therefore, the Court answers the question concerning reduction of leave entitlement for the duration of short-time work in the case of Kurzarbeit Null in the affirmative. With another judgment dated 13.12.2018 (C-385/17), the ECJ makes clear that an employee can only acquire leave entitlement for the time that s/he has actually worked. If, for example, an employee is affected by Kurzarbeit Null for the duration of three months, this will reduce his/her annual leave entitlement by a quarter. However, if the employee is working during short-time work but the number of his/her working days is reduced (e.g. from a five-day week to a three-day week), the leave entitlement is to be calculated pro rata.

It is unclear whether leave entitlement can easily be reduced or whether an agreement between employer and employee is required. In our opinion, there is no need for a consensual agreement since an employee working short-time equates with an employee working part-time, as the ECJ has stated accurately. In these cases, the automatic reduction of the leave entitlement is approved. If the employee’s working time changes during the calendar year, his/her leave entitlement for the calendar year is to be calculated pro rata depending on the time period and the number of working days. Last year’s BAG decision concerning the calculation of leave entitlement in case of unpaid leave (e.g. judgment dated 19.03.2019 – 9 AZR 406/17) as well as in case of non-work phases of pre-retirement part-time (decision dated 24.09.2019 – 9 AZR 481/18) supports this outcome. In these cases, the BAG also calculated the leave entitlement by time period and number of working days according to the respective work schedule of the employee.

In accordance with the aforementioned judgment, the employer may calculate and adjust accordingly the leave entitlement for the calendar year 2020 of the respective employee working short-time. This also applies for statutory and contractual leave entitlement.

If the employer opts for a contractual agreement regarding the possibility of reduction, it should be noted that, in practice, it will require more convincing to obtain the employee’s signature for this kind of agreement.

What happens if the employer has granted too much leave?

The longer the period of short-time work lasts, the stronger the consequences will be on the number of holidays. If the employer has already granted more leave than the employee would be entitled to after the reduction, the employer can neither claim back the leave remuneration (§ 5.3 BUrlG (German Federal Leave Act)) nor deduct the granted leave with the employee’s leave entitlement in the following year.  Therefore, the employer should not fail to keep an eye on the holidays of its employees working short-time.

How to calculate leave remuneration during and after the period of short-time work?

Short-time work does not affect the amount of the leave remuneration. If the employer grants the employee leave during short-time work, the employee is entitled to his/her leave remuneration in its entirety – and not in the amount of the short-time work allowance. I.e., when calculating the leave remuneration, the employee needs to be treated as if s/he is not working short-time.

If the employee is granted leave following the expiry of short-time work, the period of short-time work is not taken into consideration when calculating the leave remuneration. Even though the average earned income of the last 13 weeks before the beginning of the leave provides the basis for the calculation of the leave remuneration; remuneration cuts which result from short-time work within these 13 weeks are not taken into consideration (§ 11.1 sentence 2 BUrlG). According to the ECJ case law, a regulation which is disadvantageous for the employee, at least with respect to statutory annual leave, can also not be regulated in a labour agreement (judgment dated 13.12.2018 – C-385/17).


Conclusion

In spite of the unsolved questions from the labour law perspective, the employer is well advised to grant leave even during periods of short-time work in order to reduce the risks regarding receipt of short-time work allowances. It remains to be seen whether, in the following months and years, the labour courts will have to increasingly address the topic of short-time work and leave and thus be able to restore a certain legal certainty through their decisions.  

Anna Martin
Anna Martin

Anna Martin specializes in restructurings, corporate transactions and issues relating to works constitution law.

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