Strapped EU Bosses Can Nix Vacation to Keep Jobs

(CN) - Europe's highest court on Thursday upheld vacation-reduction agreements between struggling companies and unions.

The dispute rose after German auto industry subcontractor Kaiser GmbH announced plans to lay off workers because of financial difficulties in 2009. To forestall the layoffs by a year, Kaiser and its union reached a deal that handed workers a "zero hours short-time working" plan, giving them a government unemployment allowance rather than a salary paid by Kaiser.

Two employees sued after Kaiser claimed that they had not earned paid vacation time since they did not actually do any work under the zero-hours union agreement. A German labor court then asked the EU Court of Justice if Europe's annual paid leave mandate allows agreements that reduce paid vacation proportionally to workers' reduced working time.

The Luxembourg court concluded Thursday that EU law does not prevent such agreements, noting that the situation of the workers in this case is fundamentally different from that of workers unable to work because of illness.

Settled EU case law entitles people on sick leave to the same paid vacation time as active workers, while union agreements like the one in this case suspend the obligations of both employer and employee, according to the court.

"The latter is free to rest or to devote himself to recreational and leisure activities," the decision states. "Accordingly, inasmuch as that worker is not subject to physical or psychological constraints caused by an illness, he is in a situation different from that resulting from an inability to work due to his state of health."

The court also noted that the point of the agreement between Kaiser and the union was to alleviate financial hardship and avoid layoffs.

"Linking the benefit of that advantage granted to the worker by national law to the employer's obligation to pay for paid annual leave during the period of the formal extension, for purely social reasons, of the employment contract, would be liable to make the employer reluctant to agree to such a social plan and, consequently, deprive the worker of its positive effects," the decision states.

Employees who accept a zero-hours agreement essentially become part-time workers and are therefore subject to the EU pro rata temporis rules of determining vacation time, the court concluded, remanding the case back to the German labor court for final judgment.

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