Even with regard to executives, the right to annual paid leave retains its fundamental and non-waivable nature, and failure to take such leave cannot be automatically attributed to the employee solely by reason of their organizational autonomy. It is for the employer to demonstrate that it placed the executive in a position to take the leave, encouraged its use, and informed the employee of the consequences of failing to do so, for the purposes of excluding entitlement to the payment in lieu of accrued but unused leave upon termination of the employment relationship. This was clarified by the Italian Court of Cassation, Labour Section, in Order No. 32689 of 15 December 2025, addressing an issue that has, over time, given rise to differing judicial approaches.
The dispute originated from a claim brought by an executive seeking payment in lieu of accrued but unused annual leave. The employee argued that he had been unable to take his annual rest periods and, upon termination of the employment relationship, sought the monetisation of the remaining leave.
The claim had been dismissed at the previous levels of adjudication. In particular, the Court of Appeal denied the right to payment in lieu, placing emphasis on the employee’s executive position and the organizational autonomy enjoyed by him. According to the appellate judges, in the absence of evidence of exceptional, unforeseeable and unavoidable business needs that had prevented the taking of leave, the failure to use the annual rest periods was to be attributed to the executive’s autonomous choice.
This conclusion aligned with a line of case law that, in the past, had emphasized the organizational autonomy granted to executives, considering that the ability to manage the timing and methods of one’s work independently also affected the use of annual leave. From this perspective, failure to take annual leave was generally attributed to the employee’s own choice (Cass. 27971/2018; Cass. 23697/2017).
The executive challenged this decision before the Court of Cassation, alleging violations of both national and EU legislation on paid annual leave and criticizing the automatic presumption that the loss of the right derived solely from the executive status.
The Supreme Court upheld the appeal, reiterating the principle, also affirmed by the case law of the Court of Justice of the European Union, under Article 7 of Directive 2003/88/EC, according to which the right to paid annual leave constitutes a fundamental and non-waivable right, serving to protect the health and safety of the employee. Such right cannot be rendered meaningless through presumptions based solely on organizational autonomy or the position held.
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With Order No. 27253 of October 12, 2025, the Italian Court of Cassation (Labour Section) reaffirmed that the remuneration to be paid to employees during their holiday period must be equivalent to that received during ordinary working periods. In other words, the employer must also include allowances related to the duties performed if these constitute a stable and continuous component of remuneration.
The case concerned an employee of a well-known Italian railway company who worked as a train manager. During his holidays, the company had excluded from his payslip several items such as the on-board allowance, the out-of-district service allowance, the efficiency allowance, and commissions. The employee therefore claimed payment of the pay differences, arguing that these sums formed an integral part of his normal remuneration and should therefore have been duly paid during holidays.
The Court of Appeal of Milan upheld the employee’s claims, recognising that these allowances were closely linked to the duties performed and that their exclusion resulted in an unjustified reduction of salary during holidays—one that could discourage the employee from fully enjoying his rest period. According to the appellate judges, excluding such items led to an unjustified reduction of pay during the holiday period, in breach of the European principle of pay equivalence and potentially capable of deterring employees from exercising their right to annual leave.
The Court of Cassation confirmed this decision, referring to EU Directive 2003/88/EC and the case law of the Court of Justice of the European Union, which establish that the right to paid annual leave is a fundamental principle of European social law. Therefore, during the rest period, the employee must receive “ordinary” pay, including all elements that are stably connected to the performance of work.
The Supreme Court also clarified that a reduced salary during holidays may constitute an “economic deterrent”, inducing employees to forgo their right to rest. For this reason, any pay component reflecting the usual conditions of work—such as mobility allowances, commissions, or compensation for specific inconveniences—must also be included during the holiday period.
With its recent judgment No. 17643 of 20 June 2023, the Italian Court of Cassation affirmed the principle that the limitation period for a worker’s right to receive compensation in lieu of untaken holiday leave and weekly rest starts from the termination of the employment relationship, except where the employer proves that the worker was put in a position to enjoy the accrued holiday leave.
In particular, the employer must provide proof that it has invited the worker to take the holiday leave at a time that ensures that the leave still provides the person concerned with the rest and relaxation for which it is intended. In addition, the employer must have warned the worker that, if the holiday leave is not taken, it will be lost at the end of the reference period.
In the case examined by the Italian Court of Cassation, a worker, following the termination of the employment relationship due to resignation, brought an action before the Court of Milan requesting, among other claims, an order that the employer pay her compensation in lieu of untaken holiday leave.
The Court partially accepted the worker’s request, while the Court of Appeal of Milan upheld the worker’s cross-appeal, recognising the right to receive compensation in lieu of holiday leave for a total of 248 days (instead of 124 days as ordered by the Court at first instance).
The employer appealed to the Italian Court of Cassation against the judgment of the Court of Appeal of Milan, submitting, among other things, that the worker’s rights were time-barred, given the ten-year limitation period for compensation in lieu of holiday leave that must start to run during the employment relationship.
In this regard, the Italian Court of Cassation, confirming the rulings of the first instance judges, stated that the limitation period of the worker’s right to compensation in lieu of untaken holiday leave and weekly rest ‘starts from the termination of the employment relationship, unless the employer proves that the right to holiday leave and weekly rest was lost by that worker because he or she did not enjoy it despite the invitation to use it; the invitation must be clear and given in good time to ensure that the holiday leave and rest periods provide the person concerned with the rest and relaxation for which they are intended, and must contain a notice that, in the event of non-enjoyment, such leave and rest will be lost at the end of the reference period or an authorised carry-over period’.
In conclusion, therefore, it is better not to postpone holiday leave when it is the employer who invites the worker to use it to avoid the risk of definitively losing the right, including that relating to the monetisation provided for at the end of the employment relationship.
Other related insights:
Supreme Court no. 13613/2020 stated that: “The right of employee to paid annual leave must be considered a fundamental principle of EU social law, which cannot be derogated from and whose implementation by the competent national authorities can only be carried out within the limits explicitly indicated by Directive 2003/88. It is not compatible with art. 7 of the aforementioned directive, a national legislation that provides for an automatic loss of the right to paid annual leave, not subject to prior verification that the worker has actually had the possibility to exercise this right, in fact the employee must be considered the weak party in the employment relationship. work, so that it is necessary to prevent the employer from having the right to impose a restriction on his rights “.
Therefore, the non-payment of a financial allowance for the annual leave not taken at the time of the termination of the employment relationship would not only be in conflict with
Source: Guida al lavoro de Il Sole 24 ore.
Guida al Lavoro publishes a contribution by Vittorio De Luca and Antonella Iacobellis about the management of holidays in times of coronavirus.
The Government, with the latest measures issued, has identified the possible tools available to employers for the management of employment relationships in the Covid-19 emergency, including the “recommendation” to “promote the use of holiday periods”. Since “recommending” should not mean allowing the employer the power to derogate from the statutory holiday arrangements, the employer’s imposition of the use of holiday periods by its employees must be carefully considered.
Click here to read the DLP insights related to the matter and the considerations of the Firm.
