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No accrual of leave entitlements

Since the judgements of the European Court of Justice (ECJ) on the transferability and expiry of leave entitlements, new obligations have arisen for employers if leave that has not been taken by the end of a holiday year or carry-over period is supposed to expire with no compensation. The Federal Labour Court (Bundesarbeitsgericht, BAG), in several rulings, has now set out these obligations in detail.

Previous legal situation

Prior to the more recent ECJ judgements on the statutory minimum leave, the following used to apply. The statutory minimum leave generally had to be applied for and taken in the current holiday year otherwise the entitlement would expire with no compensation. In exceptional cases, it was possible to carry over leave until 31.3 of the subsequent year (e.g. if it had not been possible to grant leave for operational reasons). After the end of the carry-over period, at the very latest, entitlement to leave that had not been taken expired. Therefore, if employees failed to apply for their leave in the first place then this was to their disadvantage and their leave expired.

New legal situation according to the ECJ and the clarifications by the BAG

The ECJ decided that statutory minimum leave and the corresponding granting of paid leave do not automatically expire (e.g. at the end of the holiday year) even if the employee has failed to apply for leave in good time (cf. ECJ, judgement from 6.11.2018, C-684/16 [Max Planck Society for the Advancement of Science] “Shimizu“; judgement from 29.11.2017, C-214/16”King“).

After the ECJ ruling, it was still unclear when and under what conditions leave could indeed expire after all. The BAG has ruled on this issue (cf. e.g. rulings from 19.2.2019 – 9 AZR 423/16 and 9 AZR 541/15). Employers have to make it possible for their employees to exercise their right to paid leave. If, despite this, employees do not then, of their own volition, take leave then it will expire.

This however requires the employers to satisfy their obligation to cooperate in the fulfilment of the leave entitlement. To this end, employers have to request, at a sufficiently early stage, that their employees

  • take their specific leave,
  • and inform them clearly and in good time (demonstrably and if necessary also formally) that the leave will expire after the end of the calendar year or carry-over period if employees fail to apply for leave in good time for the current year.

If, despite this, employees do not then, of their own volition, take leave then it will expire and will not have to be compensated for on termination of the employment relationship. In this context, “of their own volition” means that the employees freely choose not to take leave and that they are not prevented by their employers in this respect. Obstacles thrown up by employers could be, for example, if an employer generally refuses to grant paid minimum leave (e.g. in the case of those who are fictitiously self-employed, with the argument that the self-employed have no holiday entitlement), or if an employer always turns down leave applications.

If an employee is not able to take leave owing to prolonged illness then a special rule applies according to which leave can be carried over for up to 15 months after the end of the holiday year. Subsequently, the leave would also expire in such a case.

Recommendation: Employers should ensure that the annual leave planning for their employees happens early, at the start of the calendar year. Well before the end of the calendar year, you should check to see if the employees have submitted applications for all their leave. Employees who have not yet done so, in particular, should be urged to apply for their remaining specific leave days for the current holiday year while making reference to the precise expiry deadlines. In cases of doubt you should be able to produce proof of this. This shall also apply to leave granted over and above the statutory minimum amount, unless the parties to the employment contract make other arrangements.

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