The European Court of Justice (ECJ) ruled yesterday that firms that pay workers in place of their holiday entitlements are breaking the law.
The court said these types of "rolled up holiday pay" schemes, which are found in certain EU states such as Britain, breach the EU working time directive- a key piece of EU legislation that guarantees workers rights to holidays and rest periods.
The ECJ in Luxembourg was ruling in a case brought by a group of British shift workers demanding the right to payment during their holidays instead of notional extra hourly pay instead. The case, which was referred to the ECJ court by the Court of Appeals in Britain, is unlikely to have an impact in Ireland where under Irish law firms cannot legally offer payment instead of a set period of annual leave.
"Payment for holidays is only given if employment ceases, in which case the employee is paid for leave due," said a spokeswoman for the Department of Enterprise yesterday.
In its ruling Europe's top court said that payment for minimum annual leave through a system of "rolled up holiday pay" rather than by means of a payment in respect of a specific period during which a worker actually takes leave, is contrary to the working time directive.
The court argued that allowing a system of "rolled up holiday pay" could lead to situations where minimum holiday was replaced just by an allowance. Under EU rules the minimum period of paid annual leave cannot be replaced by an allowance, except where employment is terminated, said the court.
"The court recalls that the entitlement of every worker to paid annual leave is an important principle of community social law from which there can be no derogation," it concluded.
