The rules on carrying forward holidays and a new decision limiting the carry forward period to 15 months for long-term sick employees.
In principle, an employee’s entitlement to holiday is lost at the end of the year if it has not been taken by then. Holiday can only be transferred to the next calendar year if the employee was not in a position to take it due to operational requirements or a long period of sickness. The carried forward holiday then has to be taken within the first three months of the calendar year. If the employee does not take the transferred holiday within this three month period this entitlement expires.
Even in cases where the employment is terminated the employee is not entitled to be paid in lieu of holiday. The position is different if the employee was unable to take holiday prior to the termination of employment due to a long period of sickness.
However, in a recent decision the European Court of Justice (“ECJ”) made it clear that in cases of sickness lasting several years, there was not an unlimited right to accumulate entitlement to holiday. The ECJ held that the 15 month carry-over period, as set out in a collectively agreed regulation, was sufficient.
The German Higher Labour Court of Baden-Wuerttemberg interpreted and extended the ECJ’s decision in another recent case to the effect that the transfer period is to be limited to 15 months after termination of the holiday year, even without an explicit regulation.
In practice, this decision is of great importance to the employer. The liability of employers to make payments in lieu of holiday to long-term sick employees could be limited to 15 months after termination of the holiday year according to the judgment. However, it remains to be seen if the judgment will be confirmed by the German Federal Labour Court.
German Higher Labour Court of Baden-Wuerttemberg, court judgment dated 21 December 2011, reference no. 10 Sa 19/11
For further information or to discuss any of the issues raised, please contact Jutta Wittmann on +49 89 242230-0.