The Current Legal Test For The Reimbursement Of Unused Statutory Annual Leave In Latvia

• Published date: 08 June 2021
• Subject Matter: Employment and HR, Contract of Employment, Employee Benefits & Compensation
• Law Firm: Vilgerts
• Author: Katrīna Eimane

At some point, every employer has had to deal with employees who do not take all or part of their statutory annual paid leave ("annual leave") for a long period of time. Irrespective of the reasons behind such behaviour, Section 149(5) of the Labour Law (Latvia) clearly provides, in the event of termination of the employment relationship, for the obligation of the employer to pay the employee compensation for the entire period for which the annual leave has not been used. Therefore, the dismissal or resignation of an employee may be very costly for an employer if the employee has not taken annual leave for several years. However, employers are often unaware that, according to current case-law, such a scenario can be avoided even if the employee does not want to go on annual leave at all. In this article we will explain, with practical examples, how to do so.

It follows from the judgments of the Senate of the Republic of Latvia ("Senate") in 2019 and 2020, as well as the case-law of the Court of Justice of the European Union ("CJEU"), the right to compensation for unused annual leave may be lost in certain circumstances notwithstanding Section 149(5) of the Labour Law. In order to avoid paying compensation for annual leave, the employer must prove that:

• it was, in fact, possible for the employee to take leave; and
• the employer has drawn the employee's attention to the consequences of not taking leave.

As the burden of proof lies with the employer, it is important for an employer to collect as much written evidence as possible for each of the preconditions during the employment relationship with an employee.

Evidence of the possibility to take annual leave

With regard to this precondition, where appropriate, the CJEU underlined the employer must formally encourage an employee to take annual leave. Irrespective of how the company in question organizes annual leave, in accordance with Section 150(2) of the Labour Law, the starting point is to find out an employees' proposed timeline of annual leave. As the employer needs to provide sufficient evidence, this process should be formalized and a written survey of all employees should be conducted within the company. For example, an employer may periodically send e-mails to employees or issue an instruction (to be signed by the employee) to inform the employer of their planned annual leave within the next months (e.g. three or six months). It would also be useful to indicate in the instruction, by e-mail or in...