1.

Can a worker accumulate days of unused paid annual leave without any time limit, or does Article 7(1) of the Working Time Directive ( 2 ) require Member States to provide for limited carry-over periods? If so, what is a reasonable length for such a period?

2.

Those are the main issues raised by the referring court, the Conseil des Prud’hommes d’Agen (Labour Tribunal, Agen, France). In addition, that court asks for clarification of the direct effect of the Working Time Directive in horizontal situations, given that the defendant in the main proceedings is a private operator running a public transport network.

3.

The present case arises out of multiple references for a preliminary ruling made in the context of five disputes before the referring court. All of those disputes concern workers currently or formerly employed by Keolis Agen SARL, the company that manages the bus transport network for the urban area of Agen (France). Those workers asked their employer to recognise their entitlements to paid annual leave which they were unable to use during the reference year in which those entitlements arose, and brought disputes before the referring court when the employer rejected those requests. A trade union, the Syndicat national des transports urbains SNTU-CFDT, is intervening in those proceedings in support of the workers.

4.

Keolis Agen is a company governed by private law that provides a public urban transport service of passengers by bus. The five applicants suing that company before the referring court are, or were, its workers.

5.

Over the course of their respective employment contracts, all of the applicants were subject to extended periods of sick leave. ( 3 ) After their return to work or after termination of their employment contracts due to incapacity to continue their work, the applicants requested that Keolis Agen either allow them to use the days of annual leave which they were deprived of during their periods of sickness or, when the employment contracts were terminated, to pay them allowances in lieu.

6.

Keolis Agen refused those requests. On the basis of the French Labour Code, ( 4 ) it considered that the applicants were not entitled to annual leave where absence from work lasted for more than a year due to an illness unrelated to work. In its view, that national law could not be set aside even if it were contrary to Article 7 of the Working Time Directive, as that directive does not create obligations for private parties.

7.

Keolis Agen claims that due to the liberalisation of transport services in France, ( 5 ) the Working Time Directive cannot be relied on against it. Even if it is in the business of providing public transport, the ability of workers to rely directly on the Working Time Directive would place it in a worse competitive position in comparison to other private companies which remain subject to French law and not to that directive.

8.

The applicants consider that they can rely on Article 7(1) of the Working Time Directive and Article 31(2) of the Charter of Fundamental Rights of the European Union (‘the Charter’) against their employer and that those EU law provisions provide for their entitlement to annual leave even during periods of prolonged sickness. French law that provides to the contrary should, therefore, be set aside.

9.

The dispute about direct effect of the Working Time Directive in the case at hand led to the first question of the referring court.

10.

The second and third questions become relevant if the applicants are entitled to paid annual leave in respect of the reference years in which they were on sick leave. Those questions arise because, according to the referring court, French law does not regulate carry-over periods for unused annual leave; it does not specify whether such a right exists or not. It follows from the orders for reference and the observations of the parties that the two highest French courts developed conflicting positions on that issue. On the one hand, the case-law of the Cour de cassation (Court of Cassation, France) ( 6 ) suggests that no limit for the carry-over of unused entitlements to annual leave exists under French law. On the other hand, the Conseil d’État (Council of State, France) seems to consider that the right to unused annual leave expires 15 months after the end of the reference year in which the entitlement to that paid annual leave arose. ( 7 ) The latter reasoning seems to follow from the case-law of the Court of Justice in which it considered a 15-month period not to be contrary to the Working Time Directive. ( 8 )

11.

In the main proceedings, the referring court asks whether EU law contains such a requirement to provide for a carry-over period. If that is so, it also wonders what constitutes a ‘reasonable period,’ after which the entitlement to annual leave may lapse. In that respect, it explains that the claims for unused annual leave in the case at hand were all filed less than 15 months after the end of the reference period during which those entitlements arose.

12.

Keolis Agen requested the referring court to refer the disputed questions to the Court of Justice. The applicants deemed that reference unnecessary and opposed that request.

13.

In those circumstances, the Conseil de prud’hommes d’Agen (Labour Tribunal, Agen) decided to stay the proceedings and to refer the following questions to the Court of Justice for a preliminary ruling (the questions are identical in all five joined cases):

14.

Written observations were submitted to the Court by the applicants in the main proceedings and the Syndicat national des transports urbains SNTU-CFDT (together, ‘the applicants’), Keolis Agen, the French Government and the European Commission. No hearing was held.

15.

In recent years, there has been an increase in the number of cases related to paid annual leave coming before the Court of Justice. ( 9 )

16.

The present reference offers the Court another opportunity to contribute to a better understanding of the Working Time Directive, and to build upon its existing case-law on the matter.

17.

The referred questions can be divided into two parts: the first question relating to the well-established concept of the direct effect of directives (A), and questions two and three, which I shall address jointly, concerning the carry-over periods in respect of unused paid annual leave (B).

18.

It follows from the orders for reference that the French Labour Code prevents a worker on sick leave for more than a year, which is unrelated to work, from acquiring an entitlement to annual leave. ( 10 )

19.

That national law would stand in contrast to Article 7 of the Working Time Directive, as interpreted by the Court. This clearly would follow from the judgment in Dominguez. ( 11 )

20.

In that case, which arose from the application of the same French law, the Court, building on its earlier case-law, ( 12 ) ruled that the Working Time Directive does not allow for the entitlement to paid annual leave to be made subject to the condition that the worker has actually worked. No worker, whether they are on sick leave during the reference period as a result of an accident at the place of work or elsewhere, or as the result of sickness of whatever nature or origin, can be denied the right to at least four weeks of paid annual leave. ( 13 )

21.

In short, the entitlement to paid annual leave results from the employment relationship and cannot be made subject to conditions. Member States may impose conditions for exercising the right to paid annual leave, but cannot make its very existence subject to conditions, including the requirement that the worker has actually worked. ( 14 )

22.

It is, therefore, clear from previous case-law that, directly on the basis of Article 7 of the Working Time Directive, the applicants acquired entitlements to paid annual leave during the years in which they were on sick leave.

23.

The defendant does not deny or try to change that interpretation of the Working Time Directive. However, it argues that that directive cannot be applied to the case at hand to create an obligation for it, because the defendant is a company governed by private law.

24.

Much ink was spilled in the parties’ observations over whether or not the defendant is an ‘emanation of the State’ ( 15 ) in the sense of the case-law on the vertical direct effect of directives, ( 16 ) and accordingly whether the situation in the main proceedings is to be qualified as horizontal (in the defendant’s view) or vertical (in the applicants’ view).

25.

In the circumstances of the present case, that qualification is, however, irrelevant. That is so for the following reasons.

26.

In Dominguez the Court indeed reiterated its position according to which directives cannot of themselves create obligations for individuals. ( 17 ) However, another line of case-law holds that general principles of law, today codified in the Charter, may themselves have direct effect, including in horizontal situations. When a general principle with direct effect is merely expressed in, and not established by the directive, the parties draw their rights directly from that principle. ( 18 )

27.

The Court has repeated on numerous occasions that the entitlement of every worker to paid annual leave ‘must be regarded as a particularly important principle of European Union social law from which there can be no derogations’. ( 19 ) That right is now also enshrined in Article 31(2) of the Charter.

28.

In Max-Planck-Gesellschaft, the Court recognised that Article 31(2) of the Charter is sufficient in itself to confer directly on workers a right to paid annual leave on which they may rely in disputes between them and their employers, be they private or public entities. ( 20 ) In other words, the Court considered that Article 31(2) of the Charter itself has direct effect, including in horizontal situations.

29.

The right to paid annual leave is thus not created, but only expressed, by Article 7 of the Working Time Directive. It is, accordingly, irrelevant that directives are denied horizontal direct effect, as the applicants can rely directly on Article 31(2) of the Charter. ( 21 ) National courts are consequently under an obligation to set aside any contrary rule of national law when deciding a case which falls within the scope of EU law.

30.

I therefore propose that the Court reply to the referring court’s first question that Article 31(2) of the Charter, as given concrete expression to in Article 7 of the Working Time Directive, entails the right to paid annual leave for every worker on which they may rely in disputes with their current or former employers, whether they are private or public entities.

31.

The referring court takes the view that, taking into consideration the judgment of the Cour de cassation (Court of Cassation), ( 22 ) French law does not specify the length of the period for carrying over paid annual leave. Thus, it considers that days of unused annual leave can be accumulated indefinitely. The French Government disputes such an understanding of the consequences of the case-law of the Cour de cassation (Court of Cassation). That government considers that the general provision imposing a three-year limitation period for introducing labour-related claims ( 23 ) also results in the limitation of carry-over periods. At the same time, following the Court’s judgment in KHS, the Conseil d’État (Council of State) considers that the limit on carry-over periods can be set at 15 months. ( 24 )

32.

In that regard, it should be noted that it is not for the Court, in the context of a reference for a preliminary ruling, to resolve differences in the interpretation of national law or to decide whether the interpretation of those provisions given by the national courts is correct. In line with the division of jurisdiction between the Court of Justice and the national courts, the Court must take account of the factual and legislative context in which the questions put to it are set, as described in the order for reference. ( 25 )

33.

The referring court decided to initiate a preliminary ruling procedure in a situation where French law does not impose any temporal limitation leading to the expiry of the rights to annual leave. The referring court is not sure whether that national law satisfies the requirements of the Working Time Directive.

34.

Keolis Agen is of the opinion that the possibility to accumulate annual leave and use it later does not fulfil the purpose of annual leave. It recalls that the Court considered that annual leave fulfils a double purpose: it enables rest from work and, at the same time, allows for the enjoyment of a period of relaxation and leisure. ( 26 ) It cites the judgment in KHS, in which the Court considered that beyond a certain temporal limit, annual leave ceases to have its positive effect for the worker as a rest period and is merely a period of relaxation and leisure. ( 27 )

35.

In that light, by its second and third questions, the referring court seeks essentially to ascertain whether Article 7(1) of the Working Time Directive must be interpreted as precluding national law which allows for unlimited carry-over periods in respect of unused paid annual leave. If, by virtue of EU law, national law is to provide for a carry-over period, the referring court wonders after how long it is reasonable to allow the entitlement to annual leave to lapse.

36.

To answer the question whether EU law requires that entitlements to annual leave be time-barred by the introduction of reasonable carry-over periods, I will start by positioning the Working Time Directive within the system of the Treaties.

37.

That directive was adopted on the basis of Article 153(2) TFEU (Article 137(2) EC at the time of adoption), under the Treaty title devoted to social policy. That provision empowers the European Parliament and the Council to adopt measures which support and complement Member State activities in the field of social policy. Amongst the various fields listed in Article 153(1) TFEU (previously Article 137(1) EC), lies the protection of workers’ health and safety. The Working Time Directive refers indeed to such concerns in its preamble. ( 28 )

38.

By virtue of Article 4(2)(b) TFEU, social policy is one of the areas of shared competence. Even if Article 153 TFEU allows the European Union to act in order to ‘support and complement’ Member States’ social policies, it does not, in my view, exclude making certain regulatory choices at the EU level and thus harmonising national laws. ( 29 ) However, legislation at EU level must be justified in the light of the principle of subsidiarity.

39.

It does not follow from the wording of the Working Time Directive that the EU legislature intended to regulate carry-over periods. The Court recently confirmed that position in the judgment of 22 September 2022, LB (Limitation period for the right to paid annual leave). ( 30 )

40.

Given that social policy is an area of shared competence and absent EU legislation on the issue of limited carry-over periods, the power to introduce limited carry-over periods or not remains in the hands of the Member States. ( 31 )

41.

The preceding conclusion is also consistent with the Court’s findings that Member States are free to regulate the conditions for the exercise of the right to annual leave. Although under the Working Time Directive Member States are prevented from imposing any conditions under which the right to paid annual leave arises, ( 32 ) they may impose conditions under which that right is exercised. ( 33 )

42.

As pointed out by Advocate General Trstenjak, ( 34 ) the Court regards the matter of the transferability of paid annual leave entitlement as a condition of implementation. Thus, the Working Time Directive leaves the Member States to determine those conditions.

43.

Member States are accordingly free to choose whether to impose limits after which the acquired right to annual leave expires or whether to allow for the accumulation of the unused entitlements until the end of the career of a particular worker.

44.

When a Member State decides to impose limits on carry-over periods, the Working Time Directive imposes only the requirement that the chosen limit does not affect the very existence of the right to paid annual leave, as it flows from the Charter and as is expressed in that directive. ( 35 ) The Court’s jurisdiction is limited to determining whether the time limit complies with EU law. The Court cannot therefore set the appropriate time limit.

45.

If national legislation provides no limitation on the carry-over period in respect of unused paid annual leave, it cannot conflict with the Working Time Directive, as that directive does not require the setting of a limit on the carry-over period.

46.

In my view, the consideration that the Working Time Directive does not require the setting of a limit on the carry-over period is not called into question by another argument, originating in an obiter dictum in KHS, according to which an unlimited accumulation of entitlements to paid annual leave would no longer reflect the actual purpose of the right to paid annual leave. ( 36 )

47.

I have previously explained that it was the main argument relied on by the defendant, ( 37 ) which sought to persuade the referring court that, in the absence of a time limit on carry-over periods imposed by law, a judge-made rule imposing such a limit is necessary.

48.

The French Government argues in its observations in favour of a carry-over period of reasonable length. ( 38 )

49.

In my view, the obiter dictum from KHS ( 39 ) does not state a rule. It merely explains why it is understandable and acceptable that a Member State might decide to impose a limit.

50.

Thus, it would be erroneous in my view to infer from that obiter dictum of the Court any regulatory duty for Member States to enact a maximum period during which the days of unused paid annual leave must be used.

51.

EU law, as it stands today, neither requires Member States to set a time limit on carry-over periods nor does it prohibit them from doing so. It leaves that to Member States’ policy choices.

52.

As to the invitation from Keolis Agen to national judges to enact such a rule, it is not for the Court to interfere with the division of powers established by the constitutional systems of a particular Member State. ( 40 )

53.

It is, however, necessary to repeat that EU law, as it stands, does not impose any duty on Member States, whether this concerns legislative bodies or courts, to provide for a time limit on carry-over periods in respect of unused annual leave.

54.

Finally, it is necessary to comment on the claims, primarily raised by the defendant, that the appropriate carry-over period is 15 or 18 months after the end of the reference period in which the entitlement to annual leave arose.

55.

Those figures result from the combination of the Court’s findings in the judgment of 3 May 2012, Neidel that a nine-month period is too short, ( 41 ) and in KHS, that a 15-month period is acceptable. ( 42 ) An 18-month period is mentioned in Article 9 of the International Labour Organisation (ILO) Holidays with Pay Convention (Revised), 1970 (No. 132), which is itself referred to in recital 6 of the Working Time Directive.

56.

When assessing whether the periods set by national laws were appropriate, the Court exercised its jurisdiction to review whether the conditions imposed by national law affected the existence of the right to annual leave. ( 43 ) The Court did not establish the appropriate limit, nor can it do so. Thus, when stating in KHS that 15 months seems an acceptable amount of time, the Court did not establish a 15-month rule under EU law. It merely confirmed that such a national rule, the result of a choice at the national level, did not conflict with the very existence of the right to paid annual leave.

57.

Regarding the ILO Holidays with Pay Convention (Revised), 1970 (No. 132), it is true that the Court has occasionally referred to ILO instruments. ( 44 ) However, it is important to differentiate between conventions such as those mentioned in the ILO Declaration on Fundamental Principles and Rights at Work, ( 45 ) to which all EU Member States are parties, and other instruments, such as the ILO Holidays with Pay Convention, which only 14 EU Member States have ratified. Such a distinction is particularly significant in the context of the present case, as France has not ratified that convention. Even if it had, the 18-month limit set by that convention binds its members as a matter of international or domestic constitutional law, but not as a matter of EU law. ( 46 )

58.

Thus, as the Commission rightly argued, in the current state of EU law, there is no time limit set on possible carry-over periods for unused paid annual leave. That is only logical given that the Working Time Directive does not prevent Member States ( 47 ) from allowing unused annual leave to accumulate without any end date.

59.

As a consequence, the Court cannot answer which time limit is a reasonable limit, given that such a choice is left to Member States. The Court may only ascertain whether or not the choice made interferes with the existence of the right to paid annual leave.

60.

I, therefore, propose that, in answer to the second and third questions of the referring court, the Court rule that Article 7(1) of the Working Time Directive does not preclude national law which allows for the accumulation of unused paid annual leave by not setting a time limit on the carry-over period in respect of that leave, nor does it set the length of a reasonable carry-over period.

61.

In the light of the foregoing, I propose that the Court of Justice answer the questions referred by the Conseil des Prud’hommes d’Agen (Labour Tribunal, Agen, France) as follows: