Remaining leave expires and no longer expires automatically

Federal Labor Court in Erfurt

The highest German labor court interprets the Federal Holidays Act in a more employee-friendly way than the case law has done so far.

(Photo: dpa)

Dusseldorf The annoyance of employees was great when their remaining vacation time expired at the end of a year. This is now over: The Federal Labor Court (BAG) ruled on Tuesday that employees’ holiday entitlements no longer expire automatically and also do not automatically become statute-barred after three years.

This can mean that remaining leave can still be taken years later or that it has to be paid out to employees when the employment relationship ends. Exception: The employer has ensured that employees can actually take their vacation.

Employees must therefore be informed in good time by the boss of remaining vacation entitlements and asked to take vacation. A three-year limitation period begins “only at the end of the calendar year in which the employer instructs the employee about his specific holiday entitlement and the expiration periods and the employee nevertheless did not take the holiday of his own free will,” the court explained (file no.: 9 AZR 266/ 20).

The European Court of Justice (ECJ) recently ruled that a holiday entitlement can only become time-barred if the employer has complied with his obligation to cooperate. The BAG has now taken this ECJ decision into account in its current judgment.

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The employer’s obligation to provide information also applies to employees who have been ill for a long time, the court explained (Az.: 9 AZR 245/19). Up to now, they were threatened with the loss of vacation 15 months after the end of the calendar year for the year of their illness. That no longer applies.

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The verdict of the highest German labor judge means a departure from the previously rather employer-friendly interpretation of the federal holiday law. It actually provides that vacation is to be taken in the current calendar year. Holiday leave could only be carried over to the first three months of the following year for urgent operational or personal reasons.

And this is how the BAG judgment came about: A tax clerk, who has been with the company since 1996 and who did not use up her 24 days of vacation per year, was given 76 days of remaining vacation days by her employer in 2011.

He assured her that this vacation would not expire on March 31, 2012, as she was unable to take the vacation due to the high workload. Instead of quickly reducing the remaining vacation time, the employee accumulated more vacation time until the end of the employment relationship in 2017: she claimed 101 days worth around 23,000 euros.

The labor court in Solingen ruled that only three vacation days were to be compensated by the company – the claims from previous years had expired. In the appeal proceedings, however, the Regional Labor Court (LAG) in Düsseldorf awarded the employees financial compensation for a total of 79 vacation days.

ECJ judgment on vacation entitlement affects statutory minimum vacation

In 2020, the tax office lodged an appeal with the BAG against the LAG judgment. The Erfurt labor judges recognized that a final decision depends on the interpretation of European law and that the ECJ must therefore decide in advance whether a vacation entitlement can only become time-barred if the employer has complied with his obligation to cooperate. The ECJ answered this question in the affirmative at the end of September 2022.

Pascal Verma, specialist lawyer for labor law and partner at NBS Partners in Hamburg, says: “The subject of holiday entitlement remains complex and must be considered in a differentiated manner.” The case law of the ECJ and the BAG refer to the statutory minimum holiday.

Verma: “For additional vacation that is granted by the employment contract or by a collective agreement, independent regulations on the expiry or limitation of vacation can also be agreed.” According to the Hamburg lawyer, the right to days off must also be separated from the right to financial compensation from remaining leave can be distinguished.

In concrete terms, this means that if the employer does not comply with his obligation to cooperate, the remaining vacation can still be taken years later in the current employment relationship. Verma: “In my opinion, however, the entitlement to be paid out for the remaining vacation time if the employment relationship ends can continue to become statute-barred or lapse due to an employment or collective bargaining limitation period.”

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