Holiday pay indemnity in collective proceedings: who pays and in what order?

Imagine: you are an employee of a small company in Sainte-Foy-lès-Lyon. Your employer is placed in judicial reorganisation, then liquidated. You have accumulated 20 days of paid holiday that you have not taken. Upon termination of your contract, your employer owes you a compensatory holiday pay indemnity. But who will pay you? The AGS (Association for the Management of the Employee Claims Guarantee Scheme) intervenes, but to what extent? And if your employer changes hands in the context of collective proceedings, who is liable?

This question, essential for thousands of employees each year, was decided by the Court of Cassation in a judgment of 8 November 2023 (No. 21-19.764). The High Court recalls a fundamental principle: the holiday pay indemnity accrues month by month and corresponds to the work performed for the former employer. Consequently, it is entered in the liabilities of the latter and covered by the AGS within the limit of its guarantee. In short, even if the holiday has not been taken, the indemnity due is a debt arising before the opening of the collective proceedings.

But why is this judgment important? Because it prevents the employee from being caught between the former employer in liquidation and the purchaser. And because it sets clear rules for real estate professionals who employ staff (managing agents, agencies, developers). Let us discover together the details of this decision and what it changes concretely for you.

The facts: a story like many that happen every day

Mr X is an employee of a cleaning company based in Bron. In 2016, his employer is placed in judicial reorganisation. On 1 July 2017, a disposal plan is adopted: the company is taken over by another company. Mr X's employment contract is transferred to the purchaser, in accordance with Article L. 1224-1 of the Labour Code (which provides for the maintenance of contracts in the event of a change in the employer's legal situation).

But what about the holiday rights acquired before the transfer? Mr X has not taken all his holiday. He claims a compensatory holiday pay indemnity from his former employer, but the latter is in liquidation. He then turns to the AGS, which refuses to guarantee the debt, considering that the untaken holiday should have been taken before the termination. The Lyon Court of Appeal upholds the AGS: in its view, untaken holiday at the date of termination can only give rise to a compensatory indemnity, not a balance of indemnity, and it should have been actually requested.

Mr X appeals to the Court of Cassation. The Court of Cassation quashes the appeal judgment. It recalls that the holiday pay indemnity, which accrues month by month, is a debt arising before the opening of the collective proceedings, even if the holiday has not been taken. It is therefore entered in the liabilities of the former employer and guaranteed by the AGS. It does not matter whether the holiday was requested or not: the indemnity is due solely by reason of the work performed.

The reasoning of the court — dissected

The judges' reasoning is simple but powerful. It relies on two pillars: labour law and collective proceedings law. In labour law, the holiday pay indemnity arises month by month, as the employee works (Article L. 3141-24 of the Labour Code). It is not conditional on the actual taking of holiday. In collective proceedings law, any debt arising before the opening of the proceedings must be declared as a liability (Article L. 622-24 of the Commercial Code). The AGS guarantees these debts within the limit of its ceilings (currently €82,272 per employee, all debts combined).

The Court of Cassation dismisses the AGS's argument that untaken holiday only gives rise to a compensatory indemnity, not a balance. It specifies that this indemnity is due as soon as the employee has worked, regardless of any request for holiday. In other words, the employee does not have to prove that they requested their holiday; it suffices that they have accrued rights.

This decision is a confirmation of previous case law (Cass. soc., 13 April 2016, No. 14-28.293). It is therefore not a reversal, but a strict application of the texts. The lower courts had erred by requiring an actual request for holiday. The Court of Cassation sets the record straight: the indemnity is a salary debt like any other, subject to the rules of collective proceedings.

What this changes for you — concretely

For employees: if your employer is in collective proceedings (judicial reorganisation or liquidation) and you have untaken paid holiday, you must declare your claim for compensatory indemnity to the judicial representative. Even if you have not taken your holiday, you are entitled to this indemnity. It will be paid by the AGS, within the limit of its guarantee. Concrete example: in Bron, an employee of an estate agency in liquidation had 25 days of untaken holiday. The AGS refused to pay, considering that he should have taken them before the termination. Thanks to this judgment, he will be able to obtain his indemnity, approximately €2,500 for a net salary of €2,000.

For employers in collective proceedings: you must include in the declared liabilities the holiday pay indemnities of all your employees, even if they have not taken their holiday. Forgetting this declaration exposes you to an action for leave to file out of time (late declaration request) and to damages.

For business purchasers: if you take over a company under a disposal plan, you are not liable for holiday pay indemnities accrued before the transfer. They remain the responsibility of the former employer and the AGS. However, note: employees retain their holiday rights for the future, but the past indemnity is a prior debt.

For real estate professionals (managing agents, property administrators): if you employ cleaning or maintenance staff in co-ownerships in Sainte-Foy-lès-Lyon, ensure that employment contracts are properly transferred in the event of a change of service provider. Holiday pay rights acquired with the former employer remain owed by that employer, but the new service provider must take over the employees with their seniority.

Four tips to avoid this type of dispute

• Declare your claims as soon as the proceedings are opened: if you are an employee, as soon as you learn that your employer has been placed in judicial reorganisation or liquidation, contact the judicial representative and declare your claim for holiday pay indemnity. You have two months from publication in the Bodacc (Official Bulletin of Civil and Commercial Announcements).
• Keep your payslips: they prove the number of holiday days accrued. Without them, it will be difficult to justify your claim. Keep them for at least five years.
• Do not assume that the AGS will pay everything: the AGS guarantee is capped (€82,272 per employee) and only covers debts arising before the opening of the proceedings. If your indemnity exceeds this cap, you will only be partially reimbursed.
• If you are an employer, anticipate transfers: in the event of a business transfer, inform the purchaser of the holiday rights in progress. This will avoid later disputes. If in doubt, consult a specialised lawyer.

In-depth: related case law and developments

This judgment is part of a consistent line of the Court of Cassation. Already in 2016 (Cass. soc., 13 April 2016, No. 14-28.293), the social chamber had ruled that the holiday pay indemnity is due even if the holiday has not been taken, and that it is guaranteed by the AGS in the event of collective proceedings. More recently, a judgment of 12 July 2023 (No. 21-21.048) specified that the holiday pay indemnity is a salary debt that must be declared as a liability, even if the employee is on a trial period.

The trend is therefore clear: the judges protect the employee by considering that the holiday pay indemnity is an acquired right, not conditional on the actual taking of holiday. This position is consistent with European law (Directive 2003/88/EC on working time). However, it may surprise employers who think that untaken holiday is lost. In reality, it turns into an indemnity.

For the future, it can be expected that the Court of Cassation will confirm this solution in other contexts, for example in the case of liquidation without transfer of the contract. Employees must therefore be vigilant: not taking holiday does not mean waiving the indemnity.

Summary and next steps

FAQ:

• Q: My employer is in liquidation, I have 15 days of untaken holiday. What should I do?
  A: Declare your claim for compensatory indemnity to the judicial representative within two months of publication in the Bodacc. The AGS will pay within the limit of €82,272.
• Q: Do I have to prove that I requested my holiday?
  A: No, the Court of Cassation has ruled that the indemnity is due solely by reason of the work performed. No prior request is needed.
• Q: Can the AGS refuse to pay if the holiday has not been taken?
  A: No, according to this judgment, the AGS must guarantee the indemnity, even if the holiday has not been taken. Refusal is unlawful.
• Q: What is the time limit to act?
  A: The claim must be declared within two months of publication in the Bodacc. After this period, you may apply for leave to file out of time to the supervisory judge within six months of publication.
• Q: My employer has been taken over, who pays the indemnity?
  A: The holiday pay indemnity accrued before the takeover is owed by the former employer and guaranteed by the AGS. The purchaser is not responsible for it.

Are you in a similar situation? A first 30-minute consultation with Maître Zakine (€45) can save you months of proceedings — and often much more. Book an appointment →