Update on vacation law – Can annual leave days still expire?

Vacation law in Germany is in a permanent state of flux. Following a recent judgment of the Federal Labour Court, the highest German court for labour matters (Bundesarbeitsgericht, BAG), annual leave days will only expire if the employer actively took steps to ensure that the employee was actually able to take his annual leave. This principle applies both for the statutory minimum number of annual leave days as well as for any additional contractual days of leave, unless otherwise agreed. This judgement once again makes it clear: it is definitely worth taking extra care when drafting employment contracts!

You can find more on this topic in the following blog post: News on annual leave law – highest German Labour Court follows ECJ position

General principles of vacation law

In Germany, vacation days are generally linked to the calendar year. They arise again every year and are designed to be taken within that year that they arise. The statutory minimum annual leave amounts to 20 days (i.e. a total of 4 weeks), based on employees working a 5-day week. Often, additional annual leave is granted contractually in Germany (in the employment contract or collective agreements), so that up to 30 days (6 weeks) of vacation are the rule. The Federal Leave Act (Bundesurlaubsgesetz) provides the possibility for employees to transfer their statutory annual leave to the following year and take it before 31 March. The employer may adopt different rules for the contractual annual leave.

The judgment

The BAG has now held that the claim to statutory minimum leave will only expire at the end of the calendar year or, where the leave is properly transferred to the following year, at the end of the transfer period, providing the employer has previously placed the employee in the position that they can actually take the leave and the employee has still not taken the leave of their own volition. The Court also imposed the duty on the employer to be proactive when it comes to employees taking their leave. The BAG generally left it up to the employer to decide how they would fulfil this obligation. However, the Court stressed that the employee must be put in a position that they have knowledge of all the relevant circumstances and can freely decide whether they wish to take their leave or not. According to the BAG, this includes the company formally calling on employees to take their annual leave and informing them in due time that their leave will otherwise expire at the end of either the calendar year or the transfer period.

In the case of a dispute, the BAG applies these principles to the statutory minimum annual leave and any additional leave granted under the employment contract. This confirms the parallels between the statutory and contractual leave, particularly where the employment agreement does not contain any clear indication that the additional contractual leave should expire regardless of whether the employer has fulfilled its duties and informed and encouraged employees to take their leave.

If the employer fails to fulfil its duties of information and encouragement, the leave that has not been taken by the end of the calendar year or the transfer period will instead be added to the annual leave arising the following year. This leave can again only expire if the statutory requirements and the judicial stipulations are fulfilled.

What to do?

Employers should regularly check whether their employees have actually taken all of their annual leave or whether it has actually expired. In order for the leave to expire, the employer must take steps in due time to clearly urge employees to take all of their annual leave and must inform the employees that they will lose the leave if it is not taken. Of course, employers should always put the information and their encouragement of employees to take their leave in writing as proof that they fulfilled their duties in the case of dispute.

New employment contracts and amendments to existing employment contracts must clearly distinguish between the minimum statutory leave and any additional contractual leave. Specifically, contracts should specify that the additional contractual leave will expire even if the employer failed to fulfil its obligations and provide information and encouragement to take this leave.

Peter Weck

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