Does a collectively agreed overtime regulation unlawfully prevent employees from taking leave?

Created by Christine Ostwald | |  Labor Law

On June 17, 2020 (file no. 10 AZR 210/19 (A)), the Federal Labor Court (Bundesarbeitsgericht, “BAG”) again referred a question to the European Court of Justice (ECJ) for a preliminary ruling on vacation law in the broader sense.

Specifically, the question is whether the collective provision on overtime bonuses in the collective agreement between the iGZ (Interessenverband deutscher Zeitarbeitsunternehmen; German Association of Temporary Employment Agencies (iGZ e.V.) and the member unions of the DGB (Federation of German Trade Unions) violates European law, in particular Article 31 Sec. 2 of the Charter of Fundamental Rights of the European Union and Article 7 of the Working Time Directive 2003/88/EC.

The referral is based upon the following facts:

A temporary worker whose employment relationship is subject to the above-referenced collective agreement (“MTV iGZ”) had filed a claim for payment of overtime bonuses with the Dortmund Labor Court. According to Section 4 of the MTV iGZ, an employee only receives bonuses if he has worked more than 184 hours in addition to his regular monthly working hours. The overtime surcharge is 25 %.

In August 2017, the temporary worker had worked a total of 121.75 hours in 2 weeks. The rest of the month he went on leave for 10 days, which amounted to 84.7 hours. According to the employee, the limit for the payment of bonuses was exceeded with a total of 206.45 hours. However, when determining whether or not the overtime bonuses should be paid, the employer only took into account the 121.75 hours actually worked.

However, the Dortmund Labor Court dismissed the complaint. According to the collective agreement’s clear wording, these hours must be "hours actually worked", so that vacation periods in which the employee did not work but only received his vacation pay are not to be taken into account. Consequently, only 121.75 hours had been "worked" in August 2017 and the limit for the payment of overtime bonuses had not been reached.

The appeal filed by the temporary worker against such decision was also unsuccessful. The Hamm Regional Labor Court (“LAG”) referred to previous rulings of the BAG which had been issued on the collective agreements for the security and transport industries. The term "hours actually worked" exclusively refers to active work. During vacation times, the employee is released from such active work. The "normal working hours" to be credited to the time account are not to be regarded as "hours actually worked" within the meaning of the collective agreement’s provision. The LAG Hamm believes that this interpretation also corresponds to the collective agreement’s intention. Overtime bonuses are regularly intended to additionally compensate for special workloads. Such workloads do not occur during vacation periods. It was therefore justified to base the collective agreement’s limit for the granting of overtime bonuses exclusively upon these actually worked hours.

Due to the plaintiff's appeal, the BAG submitted the question as to whether this interpretation of the collective agreement violates EU law and thus constitutes an inadmissible incentive for the employee to waive his vacation to the ECJ.

As the MTV iGZ’s collective standard is consistent with the regulations in numerous other collective agreements regarding the payment of overtime bonuses, the decision might have far-reaching implications. If the BAG’s previous interpretation with regard to the question of "hours actually worked" should be incorrect, the affected employers must probably expect accordingly higher wage costs. Whether or not the BAG's previous interpretation is really logical can at least be questioned. It remains to be seen what position the ECJ is going to take in this context.

Practical tip

If an employer should be subject to the corresponding collective agreements, the current interpretation, confirmed by BAG case law, that only "hours actually worked" are included in the calculation of the limit, remains valid for the time being.

In two further proceedings, the BAG on July 7, 2020 submitted direct questions on vacation law to the ECJ for a preliminary ruling. An employee on long-term sick leave and an employee with a full reduction in earning incapacity claim that their leave entitlements from the last year of their active employment (2014 and 2017, respectively) have not expired to date because the employers had not requested them to take their leave. The employers had therefore violated their obligations to cooperate. It is possible that the 15-month rule, according to which leave is forfeited without substitution in any case, will now also be reversed. It is thus becoming increasingly clear that the BAG does not rule on vacation law-related questions without a preliminary ruling from the ECJ.