In the Court’s interpretation, the right to an allowance in lieu of untaken leave, at the end of the
employment relationship, is intrinsically linked to the right to paid annual leave

In its ruling no. 21781/2022, published last 8 July, the Court of Cassation, Labour Section, ruled (along with several other issues on public employment) on a topic widely debated in legal practice and theory, namely the limits on the worker’s right to receive an allowance in lieu of untaken leave upon employment termination. 

The worker’s right to take paid annual leave is under Art. 36, paragraph 3) of our Constitution, which states that leave “cannot be waived.” The right to holidays is further defined in the Italian Civil Code, Art. 2109 and in Legislative Decree no. 66 of 8/4/2003, which confirm the impossibility to waive the right to paid leave and its unexchangeability with a monetary compensation in lieu, except upon employment termination. 

For a better understanding of the ruling, which concerns an employment relationship with a public administration, it is necessary to mention Art. 5, paragraph 8, of Decree Law  no. 95 of 6 July 2012, converted with amendments into Law no. 135 of 7 August 2012, according to which holidays, rest days and leaves of absence due to public administration personnel included in its consolidated statement of income are compulsorily taken and do not give rise to the payment of compensation in lieu, even in employment termination cases. 

A case submitted to the Supreme Court involved the Abruzzo Region and an employee who, at first instance, obtained from the Court of Labour of L’Aquila the granting of her request to ascertain the subordinate nature of her employment relationship with the Region under a series of continuative and coordinated service contracts between 2002 and 2010, and the payment of differences in salary. 

The Court of Appeal of L’Aquila, reforming the ruling under appeal, deducted from the differences in remuneration paid by the Court of First Instance, the amount calculated as compensation in lieu of holidays and leave not taken by the employee. 

In justifying its decision, the local court, referred to Court of Cassation case law (Court of Cassation ruling no. 10701/2015; Court of Cassation ruling no. 8791/2015 and Court of Cassation, ruling no. 4855/2014) and stated that there is a twofold burden of proof incumbent on a worker who takes legal action to request payment of compensation in lieu of untaken leave. This must prove that: (i) the work performance was carried out on the days set aside for leave; (ii) failure to take leave was due to exceptional and justified service requirements or force majeure. 

The decision of the Court of Appeal of L’Aquila, as stated in the ruling, appears to be in line with established case law, under which a worker who takes legal action to request payment of the compensation in lieu of untaken leave has the burden of proving that they worked on the days set aside for such leave. This is because the performance of additional work to the normal annual work constitutes grounds for the above compensation. In contrast, the burden of proving the payment rests with the employer (Civil Court of Cassation, labour section, 26 May 2020, no. 9791; Civil cassation, labour section, 6 April 2020, no. 7696). 

Continue reading the full version published in Norme & Tributi Plus Diritto of Il Sole 24 Ore.

The Court of Cassation, with order No. 13613/2020, has ruled that the employer is under an obligation to pay to the chief physician the unused holidays unless the employer is able to prove to have put the chief physician in the position to be able to use any such annual leave, informing the latter in due course and informing him/her beforehand as to the fact that, failing to use them, the executive would no longer be entitled to any such annual leave.

The facts of the case

In the case at issue, at the moment of terminating the employment contract, the AUSL (Local Health Authority) – the employer had not granted a chief physician – head of a complex structure – the equivalent in money of the annual unused holidays. The chief physician thus seized the court in order for the respective rights to be protected.

The judges seized stressed that the AUSL – employer – had failed to prove (as it should have done pursuant to the mandatory nature of the right to the relevant paid annual leave) that the chief physician had been actually put in the position to use the annual leave.

In the territorial court’s opinion, the failure to pay the allowance for the unused annual leave at the moment of the termination of the employment contract was against

  • article 7 “Annual Leave” of Directive 2003/88 and
  • article 36 of the Constitution.

The losing party, namely, the AUSL, thus lodged an appeal before the Court of Cassation against the judgment of the territorial court, relying on three grounds.

The decision of the Court of Cassation

Two of the three grounds for the appeal – deemed groundless – focused on the principle of self-determination of the annual leave by the chief physician were jointly dealt with by the Court in light of their very close connection.

Pursuant to article 21, paragraph 8 of the sector National Collective Bargaining Agreement “holidays are a right that cannot be renounced and cannot be monetised, save for the provisions under paragraph 13. Holidays are used, even if split, throughout each single solar year within periods scheduled by the chief physician in compliance with the organisational structure of the undertaking or of the body; as regards the needs related to the mandate under the respective own responsibility, the chief physician is usually entitled to use at least 15 consecutive days of annual leave in the period running between 1 June and 30 September” since it is the case, if we take a closer look, of a form of non-absolute, but rather relative, self-determination.

In other words, according to the Court of Cassation, the AUSL should have requested that the party concerned used the holidays to the extent that, in deciding whether to use the holidays or not, the chief physician should have taken into account, pursuant to the aforesaid provision, the undertaking’s structure in connection with the needs related to the mandate under the respective own responsibility.

Upon any such specific case in point, the Court of Cassation has confirmed the fact that the right to annual leave is a right that cannot be renounced, granted by article 36 of the Constitution and by article 7 of Directive 2003/88/EC, by making cross-reference, to back any such reading, the interpretation given by the European Court of Justice in case C-619/16 in which stress was laid on the fact that “the right of any worker to paid annual leave” must be “considered a particularly important principle under the social law of the European Union, which may not be renounced (…)”.

In short, in the opinion of the Court of Cassation, the employer is under an obligation “to ensure in practice and in full transparency, that the worker is actually put in a position to use the paid annual leave by requesting the latter, if necessary formally, to do so and, at the same time, by informing same – in an accurate manner and in due course to ensure that said annual leave are still fit to give the rest and the relax to the party concerned at which the aforesaid annual leave is aimed – of the fact that, if the worker fails to use the annual leave, the annual leave shall be forfeited at the end of the period of reference or of an authorised carry-over period or, still, upon termination of the employment contract if the latter occurs within any such period”. In this respect, the burden of proof lies with the employer.

Furthermore, in the case at issue, in the opinion of the Court of Cassation, the AUSL was not able to prove to have exercise the entire necessary due diligence in order for the chief physician to be actually in a position to use the paid annual leave to which he/she was entitled. Therefore, by confirming what had been inferred by the judges ruling on the merits, the Court of Cassation reached the conclusion that the failure to pay to the chief physician the allowance in lieu of the unused annual leave upon termination of the employment contract was in conflict with article 36 of the Constitution and article 7 of Directive 2003/88.