Employers to pay compensation to terminated employees for all unused holidays

The Constitutional Court of the Russian Federation (“Constitutional Court”) in a Resolution* on 25 October 2018 put an end to a long-standing debate on the procedure for paying monetary compensation for unused holidays when a person’s employment is terminated.

The Constitutional Court ruled that employers, upon an employee’s termination of employment, must pay the employee compensation for all unused holidays, regardless of the time elapsed since the end of the working year in which the leave was available.

A contradictory court practice on this issue arose from conflicting interpretations of the Russian courts on the provisions of International Labour Organisation Convention No. 132 concerning Annual Holidays with Pay (“Convention”).

In accordance with the Convention, an employer must provide annual leave to each employee and each employee must use his annual holiday allowance by no later than 18 month following the end of the relevant working year.

Referring to this particular provision of the Convention, some courts indicated that an employee must file a claim with the courts in respect of any unused leave or compensation for unused leave within an aggregate limitation period which includes the 18 month period following the end of the relevant working year together with the relevant limitation period established by the Russian Labour Code.

If the employee made a court application after the expiration of this aggregate limitation period, his claim was rejected.

As a result, the courts recognised that if the employee did not use the leave within after the end of the working year in which the leave was available and did not apply to the court with a claim within the established limitation period, then the leave was “lost”.

In its Resolution, the Constitutional Court stated that the provisions of the Convention on the 18 month period in which leave must be used do not affect the employee’s right to receive compensation for any unused leave.

According to the Constitutional Court, imposing an aggregate limitation period on employees in which they are required to file a claim for unused leave is an unacceptable restriction of employee rights. An employee should not lose the right to receive compensation for unused leave even if more than 18 month have passed since the end of the working year in which such leave was available.

Recommendations

Since the provision of leave to an employee is the responsibility of the employer, clients should monitor that leave is made available to, and taken by, employees in order to avoid the accumulation of multiple unused holidays.

It should also be noted that late provision of leave to employees, as well as the absence of a vacation schedule approved by the employer, not only leads to the accumulation of unused holidays, but may also result in the employer (or its officers) being held administratively liable for breach of labour law.

If you have any questions on the matters referred to in this eAlert, please do not hesitate to contact CMS Russia experts Valeriy Fedoreev, Christophe Huet and Ekaterina Elekchyan or your regular contact at CMS Russia.

*In Russian