The monetisation of leaves at the end of the employment relationship

19 February 2024

It is contrary to European Union law to prohibit the payment of an allowance to an employee concerning leave days not taken at the time of termination of employment.

In its decision of 18 January 2024, delivered in Case C-218/22, the European Court of Justice ruled that national provisions to contain public expenditure do not recognise an allowance for leave accrued and not taken by the employee at the end of the employment relationship are contrary to Community law.

The case started from the lawsuit brought by an employee of an Italian Municipality who, upon termination of his employment, did not receive payment of the allowance in lieu of accrued and untaken leave.

Specifically, the Municipality rejected the employee's request because, according to Article 5 of Decree-Law No. 95/2012, a civil servant was not entitled to payment for leave accrued on termination of employment. The rule, inspired by the need to contain public expenditure, prohibited the monetisation of untaken leave at the end of the employment relationship.

The matter was referred for a preliminary ruling to a national court, which requested the European Court of Justice's (ECJ) intervention to ascertain the Italian rule's compliance with the European Union law.

The ECJ, therefore, declared the national provision incompatible with EU law because the ban on payment for untaken leave cannot be justified solely by the need to curb public expenditure. According to the Court, the only circumstance that excludes the right to the payment of this allowance is that the employee deliberately refrained from taking it despite an explicit invitation by the employer to take the leave.

The ECJ then referred the case back to the Italian court, ruling that if the Municipality had not shown that it had exercised all due diligence to ensure that the employee was actually in a position to take his leave, it would have had to pay the relevant allowance in lieu.