Worker on zero-hours contract placed on short-time working can have holiday pay reduced

Heimann and another v Kaiser GmbH Cases C-229/11 & 230/11 ECJ

annual leave | holiday pay | short-time working | zero-hours contract

The European Court of Justice (ECJ) has confirmed that the holiday pay of a worker on a zero-hours contract placed on short-time working can be calculated on a pro rata basis. 

Implications for employers

  • The holiday pay of a worker on a zero-hours contract can be calculated on the basis of the work that he or she actually does. 
  • If that worker does no hours because of a lack of work, his or her holiday pay can be reduced to zero during this period. 

A German company dismissed Mr Heimann and Mr Toltschin when it ran into financial difficulties. However, a social plan agreed between the company and its works council meant that they were placed on "zero-hours short-time working" contracts for one year. They were not required to work and the company did not have to pay them a salary. They received an allowance (similar to UK guarantee payments) from the German Government. Mr Heimann and Mr Toltschin claimed in the German Labour Court that they were entitled to holiday pay during this period. 

The German court asked the ECJ whether or not EU law precludes national legislation or practice, such as a social plan agreed between an undertaking and its works council, under which paid annual leave is reduced in proportion to workers' reduced working time during a period of financial difficulties for the undertaking. 

The ECJ drew a distinction between a worker placed on short-time working in the context of a social plan and a worker who is unable to work as a result of illness. While the latter is entitled to paid annual leave in the same way as a worker in active employment, the former is not subject to physical or psychological restraints caused by illness. The ECJ found that the workers in this case are comparable to part-time workers and their holiday pay should be calculated pro rata to the work done in the holiday year. 

The ECJ concluded that the paid annual leave of a worker on short-time working can be reduced in proportion to the reduction in working time. 

Additional resources

  • Zero-hours contract clause Use this model contract clause as a guide when preparing a zero-hours contract. Zero-hours contracts are used by employers to cope with varying demands for staff, whereby an employer has no obligation to offer an individual work, but when it does, he or she is required to accept the offer. 
  • Letter seeking agreement to a lay-off or short-time working Use this model letter to seek an employee's express agreement to being laid off or put on short-time working, where there is no contractual power to do this. 
  • Line manager briefing on part-time workers This line manager briefing explains the law applicable to part-time workers and provides practical guidance on how to manage them. 

Case transcript of Heimann and another v Kaiser GmbH (on the ECJ website)

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