5 March 2012

Bill to amend the Holiday Act and interesting EU ruling on holiday

The government has submitted a new bill for consultation concerning a number of amendments of the Holiday Act. The amendments include, inter alia, a specification of the concept "salaried employee", that employees who get sick during holiday are entitled to a replacement holiday, a simplification of the holiday rules concerning private domestic help and persons covered by the special tax system for foreign scientists and an extended duty to report. 

In addition, the European Court of Justice determined on 24 January 2012 that an employee is always entitled to a minimum of four weeks' paid holiday irrespective of whether the employee has been absent due to sickness in the period when the right to paid holiday is earned.

Bill for consultation

The concept "salaried employee"

The Holiday Act only covers salaried employees. A salaried employee means a person receiving remuneration for personal work under a contract of employment. According to case law, a person with co-ownership of 50 % or more of the capital of a company is generally not considered a salaried employee. A combination of less than 50 % ownership of the capital and e.g. membership of the board of director or the executive board may also result in an employee not being considered a salaried employee. It thus depends on a specific assessment of the employee's ability to influence the day-to-day business of the company whether he is considered a salaried employee.

According to the Bill, a salaried employee is defined as a person who does not have any decisive influence on the company with whom the employee is employed. The purpose of the Bill is to establish more uniform case law, and the Bill authorises the Minister of Employment to lay down the detailed rules as to when a person has decisive influence on the company with whom he is employed.

Sickness during holiday

According to the current Holiday Act, an employee is only entitled to a replacement holiday if he gets sick before the commencement of the holiday. If he gets sick during the holiday, it is the responsibility of the employee, and the holiday is considered taken.

The Bill suggests that if an employee gets sick during holiday, he is entitled to a replacement holiday provided that certain conditions have been fulfilled.

According to the Bill, an employee, who has earned the right to 25 days of paid holiday, is not entitled to a replacement holiday until he has had five sickness days during his holiday in the holiday year. The employee is still considered to take holiday for the first five sickness days, and there is therefore no replacement for those days. If the employee has earned the right to less than 25 days of paid holiday, a pro rata calculation will be made of the days for which the employee receives no replacement compared to the earned holidays. In order to be entitled to a replacement holiday, it is a requirement that the employee notifies the employer about the sickness according to applicable rules. The right to replacement holiday (and calculation of the first give days) does also not apply until the time when the employer has been notified about the sickness.

The employer must receive documentation of the sickness, e.g. by way of a doctor's certificate ('friattest') or the like. Contrary to the general rules on the obtaining of sickness documentation, the employee must pay for the documentation in case of sickness during holiday. This rule is to minimise the risk of abuse of the right to a replacement holiday.

According to the Bill, an employee who gets sick during holiday must attend work again after having been reported fit for duty.

It appears from the explanatory notes to the Bill that it must be ensured that the Danish rules on sickness during holiday comply with the requirements of the European Court of Justice. We have described this question in a previous Newsletter based on a specific ruling from the European Court of Justice.

Special rules concerning private domestic help and persons covered by the tax arrangement concerning scientists

Private domestic help and persons covered by the special tax system for foreign scientists are generally considered salaried employees and covered by the Holiday Act in its entirety. This means that the right to paid holiday is earned in the qualifying year (the calendar year) , and the holiday is to be taken in the next holiday year (1 May to 30 April).

According to the Bill, private domestic help - working less than eight hours each week - is entitled to "take-as-you-earn holiday", while persons covered by the special tax system concerning foreign scientists can agree on take-as-you-earn holiday with the employer. Take-as-you earn holiday means that the holiday is to be taken concurrently with the earning of the holiday.

This is a material amendment compared to the general arrangement of the Holiday Act concerning staggered holiday. The Bill further proposes that holiday allowance is paid directly to the private domestic help in case of resignation.

The consideration behind the rule concerning private domestic help is to ease the administration of the private household, while the consideration in relation to persons covered by the special tax system concerning foreign scientists is to strengthen the possibility of Danish trade and industry and the research institutions to attract and retain foreign labour.

Extended duty to report

The Bill proposes that all employers, including those covered by a holiday card scheme, are generally to report holiday allowance and the number of holidays to the Income Register. The Bill also proposes that the penalties for non-reporting are increased.

It is the intention of the Bill that salaried employees may get a general overview of the remaining holiday with FerieKonto. The Bill should also provide better protection against double income support and transparency in relation to non-withdrawn holiday allowance.

Comments

With this Bill, the Government sets the scene for a necessary implementation of EU law resulting to some extent in increased costs for the employers, but the Bill will also result in other adjustments resulting in some respect in increased, administrative burdens on the employers.

The Bill proposes commencement with effect from 1 May 2012. The time-limit of the consultation expired on 15 February 2012. We will follow the development of the Bill and forward a Newsletter when and if the Bill is adopted.

According to the new EU ruling, employees are entitled to minimum four weeks' paid holiday

A new ruling from the European Court of Justice, which determines that an employee will always earn the right to paid holiday if he gets sick during holiday, may result in an amendment of the Danish Holiday Act.

The right to holiday is regulated by EU Directive no. 2003/88 (the Working Time Directive). It appears from this ruling that the employee is entitled to minimum four weeks' paid holiday each year, and that this holiday is determined in accordance with the criteria of national legislation concerning entitlement to holiday.

The wording of the Directive may give rise to doubt as to whether an absolute right exists, or whether the member states may determine the criteria in connection with this entitlement.

The case before the European Court of Justice concerned a French employee, who had been absent due to sickness from 3 November 2005 to 7 January 2007 due to a transport accident between his home and work. According to the French rules, employees do not earn the right to paid holiday when absent due to sickness as the employees are to compensate a least one months' actual working time in a reference period of one year.

The European Court of Justice determined that an employee's right to yearly paid holiday is a special and important principle of EU social legislation which cannot be derogated from to the detriment of the employee. Consequently, the European Court of Justice found that the Directive had to be construed in such a way that it prevents national legislation which implies that requirements are made for the entitlement to four weeks' paid holiday.

The European Court of Justice further found that the rules concerning the right to four weeks' paid holiday are minimum rules, and that the member states may lay down conditions for the entitlement to paid holiday in excess of four weeks. In Denmark, employees earn the right to five weeks' paid holiday. It is therefore our opinion that the comments of the European Court of Justice must be construed with the result that it is possible to lay down conditions for the entitlement to the fifth holiday week.

Comments

According to the Danish Holiday Act, employees do not earn the right to paid holiday when absent due to e.g. maternity leave, other leave or sickness, where salary is paid in full or in part. Based on the ruling of the European Court of Justice, there is a risk that these rules are not in accordance with EU law, and it may be necessary to amend the Danish Holiday Act in this respect. Employees who are not entitled to salary during sickness, and employees who receive maternity benefits will in some situation earn the right to holiday allowance. It is uncertain whether the ruling will also affect these rules.

The European Court of Justice's clear focus on the right to four weeks' paid holiday each holiday year also gives rise to consideration as to whether the above proposal to the amend the Danish Holiday Act in relation to replacement holiday in connection with sickness is sufficient extensive to comply with the requirements of the European Court of Justice. For example in those situations where the employee has only earned the right to less than 20 days' paid holiday, he will not have the opportunity to take four weeks' paid holiday as part of these four weeks' holiday will be sickness days for which the employee will receive no replacement holiday.

The content of this Newsletter is not, and should not replace, legal advice.

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