Is the Employer Obliged to Compensate Overtime when Paying-out a Holiday?

When paying out holidays, overtime compensation must be taken into account if the overtime is structural.
An employer had deployed a driver of a refrigerated/freezer truck on international long-haul road transport to and from Italy. As of March 1, 2018, the employer sold six of his trucks and trailers to another company, which would continue the ongoing export activities to Italy.
On this occasion, the driver entered into an employment contract with this other company. The employment contract, however, already ended on October 13, 2018. Just one day earlier, the parties to the CLA for professional road haulage transport, applicable to the employment contract, reached a CLA agreement on the value of a holiday. Under this CLA agreement, it would become applicable that, as of January 1, 2019, the value of the statutory minimum number of holidays and of two holidays exceeding the statutory requirements, would be set and would include 90% of a number of allowances and 22.75% of the overtime compensation for overtime in excess of 40 hours per week. The percentages of 90% and 22.75% were related to the -not always structural- nature of these compensations.
In return, employees were offered a one-off payment of €750 in 2019, for waiving their rights over the years 2014-2018. The employee was not satisfied with the one-off payment and claimed payment of approximately € 6,000 of outstanding wages.
When the Sub-district Court granted the claims, the employer lodged an appeal before the Court of Appeal.
Since two other defences of the employer had failed completely (no transfer of a business as of March 1, 2018 would have taken place) or only partly (the wage claim would have expired), the Court of Appeal had to rule on the question on the amount of wages to be paid if an employee takes a holiday, and in particular, if overtime compensation is included in the amount.
Based on case law of the Court of Justice of the European Union regarding the interpretation of the European Working Time Directive, underlying the Dutch holiday legislation, the fact is that, by taking a holiday, an employee shall not be placed in a more disadvantageous position than the one he/she would have been in had he/she not taken a holiday and had he/she worked. By virtue of the same case law of the European Court, the Court of Appeal therefore examined whether the overtime had been mandatory, whether it had largely been foreseeable and common practice, and whether the compensation for overtime constituted a significant element of the total remuneration.
The Court assumed that overtime had been mandatory, since, as a good employee, the employee had been obliged to carry out a trip to Italy as quickly as possible and to prevent the truck’s downtime as much as possible. According to the Court, the fact that the overtime had been foreseeable as well as common practice followed from the fact that, nearly every month, the overtime had been substantial, even though there was some fluctuation in the number of overtime hours. And, with an annual average of 10-20%, overtime compensation it constituted a significant part of the total remuneration,. Therefore, overtime compensation also should be taken into account when reimbursing a holiday.

Under the law, an employee who, at the end of his/her employment contract, is still entitled to holidays, is also entitled to a cash benefit up to the amount of the salary over a period that corresponds to his/her entitlement to holidays. Not uncommonly such holidays, payable at the end of the employment contract, are paid-out at an amount that is too low.
It follows from a judgment of the Supreme Court in 1990, that payment of holidays should not only be based on the fixed salary, but also on everything that has to be paid when the employee takes a holiday. This means, for example, that the holiday allowance and a thirteenth month also have to be included in the calculation of the amount of a holiday to be paid-out. Also variable wage components, such as commission or a bonus, have to be included in the calculation of a holiday to be paid-out, based on the average over a representative period. Since it is important to prevent an employee from being reluctant to take holidays because he/she might earn less than if he/she would not take a holiday, based on European case law, all kinds of additions to fixed wages and compensation for structural overtime also are to be included in the calculation of the amount of the payment of holidays.
Since the purpose of working time reduction days (ATV days) and scheduled days off is different from holidays, namely to provide employment, they are not automatically equated with holidays in judgments of the Supreme Court and it depends on the scheme in which those days were allocated, whether they have to be reimbursed at the end of the employment contract.
When holidays are not paid out at the end of the employment contract, but during the employment contract, as often happens with on-call workers, there is another dimension to this point. In that case, the statutory provision on payment of holidays at the end of the employment contract does not apply. Paying out holidays otherwise than at the end of the employment contract is even prohibited by law. If it is needed to make payment of holidays permissible, like for on-call workers where other arrangements are often considered to be very impractical, it first of all has to be plausible that the employee is still able to enjoy holidays and therefore, that they can enable the recovery of the work energy used. Furthermore, financially the employee should not be worse off than if he/she were to enjoy a paid one day off during the employment contract. In order to meet this condition, account should also be taken of the fact that the employee would have been entitled to wages -and would therefore have accrued additional holiday entitlement- if he/she had taken a day off.
For the deprivation of additional accrual of holiday entitlement, the employee can be compensated by using a different method of calculating the amount of compensation for unused holidays. For an employee with 25 holidays in a calendar year of 261 working days, the calculation of wages for one holiday should not be based on 25 holidays on 261 working days, but on 25 holidays on 261-25 = 236 working days.