Supreme Court ruling: Full compensation for loss of holiday allowance

The Supreme Court has ruled that an employee was entitled to compensation for the holiday allowance that the employee did not earn during sickness absence.

An employee was injured in connection with a bus accident and was dismissed due to long-term sickness absence. The liability insurance company paid compensation for loss of earnings, but refused to pay compensation for loss of holiday allowance as the employee had already received salary during holiday from the former employer and compensation for loss of earnings in the weeks when the employee should have taken holiday had she not been injured.
The employee claimed that she was also entitled to compensation for loss of holiday allowance.

COMPENSATION FOR HOLIDAY NOTWITHSTANDING HOLIDAY WITH PAY OR HOLIDAY ALLOWANCE

The Supreme Court referred to two previous Supreme Court cases where it had been determined that holiday allowance is part of the remuneration earned in an employment relationship, and that holiday allowance may be claimed as loss of earnings notwithstanding being earmarked for holiday. In addition, it was established that an employee is entitled to holiday allowance if the employee is prevented from taking holiday due to sickness.

Finally, the Supreme Court had previously ruled in a situation where the employee had been prevented from taking holiday due to sickness that payment of holiday allowance was to be considered a kind of compensation for non-taking of holiday, and that this did not prevent the employee from receiving compensation for loss of earnings in the same period.

These rulings therefore concerned the employee's right to compensation for loss of earnings in the weeks when the employee could have taken holiday.
In the present case, the Supreme Court was to decide whether the employee was also entitled to holiday allowance in the situation where compensation for loss of earnings had been paid in the weeks when the employee could have taken holiday with pay had the employee not been absent due to sickness.

The Supreme Court found that the case law from 2004 and 2009 applied irrespective of whether the employee was entitled to holiday with pay or holiday allowance. The employee was therefore also entitled to compensation for loss of holiday allowance.

Consequently, the insurance company was ordered to pay compensation for holiday allowance of 12.5 % of the salary and the sixth holiday week of 2.5 %. The Supreme Court noted that the outcome would not be different had the employee received holiday allowance from her former employer for the period until the effective date of termination.

HOLIDAY ALLOWANCE IS NOT CONSIDERED COMPENSATION FOR A FINANCIAL LOSS, BUT COMPENSATION FOR NOT BEING ABLE TO TAKE HOLIDAY

It is a fundamental principle within tort law that the injured party is not to be overcompensated for the loss that the party has suffered due to the injury. This was the insurance company's argument for not compensating the loss of holiday allowance.

At the same time, a principle is applied within employment law that holiday must be taken for recreational purposes, and it is firm practice that a sick employee cannot take holiday as this will not serve the recreational purpose of the holiday. An employee absent due to long-term sickness, who has not been able to take holiday, is therefore entitled to holiday allowance as a sort of compensation for non-taking of holiday.

Compensation for holiday allowance must therefore not be considered compensation for a financial loss, but compensation for non-taking of holiday.

contacts

Marianne Lage

Partner

Maria Schmiegelow

Attorney