Paid leave and sickness: What you need to know after the 13 September ruling!

Cass. soc., 13 September 2023, no. 22-17.340 to 22-17.342 Cass. soc., 13 September 2023, no. 22-17.638 Cass. soc., 13 September 2023, no. 22-10.529 Cass. soc., 13 September 2023, no. 22-14.043

The Court of Cassation has just published a series of rulings rejecting the application of French law in favour of European law on a number of issues relating to paid leave:

• Calculating paid leave in the event of non-occupational illness
• Calculating paid leave in the event of an accident at work
• Limitation of entitlement to holiday pay
• Deferral of paid leave in the event of parental leave

These rulings are part of the Cour de cassation’s desire to bring domestic law into line with European law.

• What the Labour Code says:

For the record, French law makes the acquisition of paid leave entitlements conditional on the performance of actual work.

Thus, an employee suffering from a non-occupational illness or who has been the victim of an accident at work does not acquire paid leave during the time he is off work (art. L. 3141-3 and L. 3141-4 of the French Labour Code).

The law provides for a mitigating measure, considering as an actual period of work the period during which the employment contract is suspended due to an accident at work or occupational illness, up to a maximum uninterrupted period of one year (art. L. 3141-5 of the Labour Code).

• What European law says :

Conversely, European Union law makes no distinction between workers who are absent on sick leave and those who have actually worked. The right to paid leave is linked solely to the status of employee.

The two relevant texts are Article 31(2) of the Charter of Fundamental Rights of the European Union and Article 7 of Directive 2003/88/EC :

• “Every worker has the right to limitation of maximum working hours, to daily and weekly rest periods and to an annual period of paid leave” (art. 31 §2 of the Charter of Fundamental Rights of the European Union).

• « 1. Member States shall take the necessary measures to ensure that every worker is entitled to paid annual leave of at least four weeks, in accordance with the conditions for entitlement and granting laid down by national legislation and/or practice.

2. The minimum period of paid annual leave may not be replaced by financial compensation, except in the event of termination of the employment relationship” (art. 7 of Directive 2003/88 EC).

The Court of Justice of the European Union (CJEU) has ruled, in the light of these two texts, that when the employee is unable to work due to ill-health, which is beyond his control, his absence must not have any impact on the calculation of his paid leave entitlement (CJEU, Grand Chamber, judgment of 6 November 2018, Bauer, C-569/16).

In this ruling, the CJEU also reiterates the obligation on national courts to disapply national legislation that is contrary to EU law, in particular a directive, even in the context of a dispute between two individuals.

• The consequences of regulatory conflict :

As a reminder, in the event of a conflict between European law and national law, European law takes precedence over any provisions that conflict with national law.

In principle, the effects of Union law are immediate. Individuals can invoke European law directly before the courts (principle of direct effect).

By way of exception, directives do not allow the application of national law to be set aside in a dispute between private individuals until they have been transposed into national law. In practical terms, this means that the directive only applies when national provisions to the contrary have been repealed.

Directives are therefore only binding in relations between Member States and individuals (vertical direct effect), but cannot be invoked between individuals (horizontal direct effect).

Consequently, it is for the national court to disapply national provisions that are contrary to Union law.

This is how the Court of Cassation proceeded in the rulings handed down on 13 September 2023, by ruling out the application of certain provisions of French legislation relating to the acquisition of paid leave, having regard to Article 31§2 of the Charter of Fundamental Rights of the European Union on the right to rest.

For several years now, the Court of Cassation has been suggesting that the Labour Code be amended to bring French law into line with European Union law (see the annual reports of the Court of Cassation for 2014, 2015 and 2018).

For the Cour cassation, these changes had become all the more necessary since the CJEU ruling of 6 November 2018, which clarified that Article 31§2 of the Charter of Fundamental Rights of the European Union on the right to rest applied in disputes between private individuals (horizontal direct effect).

It is against this backdrop that the Cour de cassation has recently reversed its case law:

1. In the first ruling, the Court ruled out the application of the provisions of Article L. 3141-3 of the French Labour Code and specified that an employee on sick leave for non-occupational illness is entitled to paid leave (Cass. soc., 13 September 2023, no. 22-17.340 to 22-17.342).

In this case, employees contracted a non-occupational illness that prevented them from working. They then calculated their entitlement to paid leave by including the period during which they were unable to work.

The Court of Cassation ruled that employees suffering from illness or an accident of any kind (occupational or non-occupational) are entitled to claim paid leave entitlements by including in their calculation the period during which they were unable to work.

2. In a second ruling, the Court ruled out the application of the provisions of Article L. 3141-5 of the French Labour Code and stated that in the event of an occupational injury or disease, compensation for paid leave is not limited to one year (Cass. soc., 13 September 2023, no. 22-17.638).

In this case, an employee suffered an accident at work. He calculated his entitlement to paid leave by including the entire period during which he was off work.

The Cour de cassation has ruled that in the event of an accident at work or occupational illness, the calculation of paid leave entitlements will no longer be limited to the first year of absence from work.

3. The Court of Cassation also ruled on the statute of limitations for paid holiday pay following the requalification of an employment contract (Cass. soc., 13 September 2023, no. 22-10.529).

In this case, a teacher worked for a training institute for more than 10 years. Having obtained a court ruling that this contractual relationship should be classified as a contract of employment, she asked to be compensated for the paid leave she had never been able to take during those 10 years.

,The Cour de cassation has ruled that the limitation period for holiday pay can only begin to run if the employer has taken the necessary measures to enable the employee to effectively exercise his right to paid leave.

4. Lastly, the Court of Cassation considers that paid leave earned at the start of parental leave must be carried forward after the date on which the employee returns to work (Cass. soc., 13 September 2023, no. 22-14.043).

In this ruling, an employee’s employment contract was successively suspended due to illness, then pathological and prenatal leave, then maternity leave and finally parental leave.

The Court of Cassation has aligned itself with European law (European Directive 2010/18/EU) and ruled that when the employee was unable to take his annual paid leave during the reference year due to the exercise of his right to parental leave, paid leave earned at the start of parental leave must be carried over to after the date on which you return to work. The employee is therefore entitled to compensation for paid leave not taken as a result of her parental leave.

• Consequences for the employer :

From now on, we can only recommend that employers include periods of sick leave when calculating their employees’ paid holiday entitlement, in order to avoid disputes which would undoubtedly result in a conviction in view of the above-mentioned rulings.

However, there is still some uncertainty as to the adjustment to previous reference periods.

As a reminder, paid leave entitlements are accrued over a reference period running from 1^st June of the previous year to 31 May of the current year (unless otherwise stipulated by the applicable collective agreement or a company agreement).

Thus, for leave in the process of being earned, the employer must take into account absences due to illness when calculating the number of days of paid leave. Failing this, employees will be able to take legal action to obtain recognition of their paid leave entitlements.

For leave taken in previous reference periods, it is also prudent to make an adjustment.

• Consequences in domestic law :

The legislator’s intervention in this area is particularly eagerly awaited, and this reversal of case law should encourage it to bring itself into line with European law.

The amendment of the Labour Code is all the more necessary in order to avoid any infringement proceedings against France for failure to transpose the provisions of the directive into national law.