In the joint cases of 6 November 2018 No. C-569/16 and C-570/16 the CJEU ruled that if the employment relationships cease as a result of the death of the employee, the compensation for the unused annual leave shall not be extinguished and shall be inherited. This judgment must be applied even where the provisions of national legislation do not entitle the heirs of the employee to a compensation for the employee’s unused paid annual leave.
The purpose of the right to paid leave is, first of all, to enable the employee to take rest from carrying out the tasks provided for in the employment contract and, second, to allow the employee to take rest and have time for relaxation and leisure. According to the already established case law of the CJEU, the right of every employee to the paid annual leave must be regarded as a fundamental principle of the social law of the European Union, derogations from which are not allowed and which must be implemented by the competent national authorities. According to the established case law, the right to annual leave is only one of two parts of the fundamental principle of the social law of the European Union, because this right also includes the right to receive pay. The purpose of the paid leave is to ennable the employee to actually use its right to the leave and rest.
The minimum period of annual leave cannot be substituted with a compensation, except in the case of termination of employment relationships. This is to ensure that the employee could have a good rest, by effectively taking care of safety and health care of employees. In the event of a breach of employment relationships, the employee is no longer able to use the paid annual leave he is entitled to, therefore, in order for the employee not to lose such a right, it must be expressed in a financial form.
Upon the death of the employee, he/she inevitably loses the right to use the leisure time, inherent in the right to the paid annual leave he/she was entitled to on the day of his/her death, although he/she retains the right to receive the pay for the unused right to annual leave.
Therefore, it can be argued that, in principle, this obligation of the employer should be treated in a financial sense. The employee’s right to paid annual leave is of a purely financial nature. This means that it is the property of the person concerned, which cannot be taken away retroactively because of the death of that person. Accordingly, the beneficiaries of the property to be inherited should not be deprived of the effective access to property rights – the compensation for the unused paid annual leave.
The Labor Code of the Republic of Lithuania provides that the substitution of the annual leave with a monetary compensation is prohibited, except in the case of the expiry of employment relationships. The death of the employee is one of the grounds for the expiry of the employment contract. It follows from the comprehensive assessment of the national legislation, that it is in concert with the rules discussed in the judgment of the CJEU; the judgment of the CJEU brings in more clarity by specifying that the right to the compensation shall remain upon the death of the employee and shall pass on to the heirs.