Companies must pay commissions during vacation periods
On May 22, 2014, the Court of Justice of the European Union handed down a judgment in which it declared the right of workers who collect part of their salary in commissions to receive an amount in respect of commissions during their vacation periods.
In arriving at this conclusion, the court asserted that the right of every worker to take paid annual leave must be regarded as a particularly important principle of European Union social law, from which there can be no derogations. The court interpreted article 7 of Directive 2003/88, concerning certain aspects of the organization of working time, clarifying that the term “paid annual leave” (i.e. vacation) which appears in the law means that, as long as the “annual leave” lasts, compensation must be maintained. In other words, workers must receive their normal compensation for this period of rest.
In the case brought before the court, the worker collected part of his salary in commissions. These commissions represented approximately 60% of the worker’s compensation, and the worker did not generate any commissions during the period of his annual leave.
The court considered that, notwithstanding the compensation received by the worker during the period in which he actually takes his annual leave, he may be deterred from exercising his right to annual leave, given the financial disadvantage which, although deferred, is nonetheless genuinely suffered by him during the period following that of his annual leave. Therefore, the court concluded that this reduction in the worker’s compensation in respect of his paid annual leave is contrary to the objective pursued by article 7 of Directive.
As regards the methods of calculating the compensation to which the worker is entitled during his vacation, the court held that it should be determined by the national court, in light of the objective pursued by article 7 of Directive 2003/88 (that workers have at least four weeks of paid annual leave) and according to the following criteria:
(i) In principle, the compensation paid in respect of the vacation must be determined in such a way as to correspond to the normal compensation received by the worker. Where the compensation received by the worker is composed of several components, the determination of the normal compensation requires a specific analysis.
(ii) Specifically, all components of total compensation relating to the professional and personal status of the worker (any allowances relating to seniority, length of service and professional qualifications) must be maintained during his paid annual vacation.
(iii) The components of the worker’s total compensation that are intended exclusively to cover occasional or ancillary costs need not be taken into account.
In the case analyzed, referring to the criteria adopted by the national court, the court noted the possibility that an average calculated on the basis of a reference period considered to be representative, under national law, may achieve the objective pursued by article 7 of Directive 2003/88.