News - Germany

Germany - September 2012

The German Federal Labour Court overturns the practice of denying pay in lieu of holiday not claimed in the holiday year

According to art 7 clause 3 of the German Federal Vacation Act ("BUrlG"), annual leave has to be granted and taken in the same calendar year. Carrying forward annual leave to the following calendar year is only permitted if there are urgent operational reasons or reasons concerning the personal capability of the employee. Any annual leave carry-forward has to be granted and taken within the first three months of the following calendar year. According to the Senate’s most recent decisions, this time-limit also applied to claims for pay in lieu of holiday on termination of employment as such payment was considered a replacement for the entitlement to the holiday. This recent decision of the Federal Labour Court departs from previous decisions following European law. The plaintiff had been employed as operations manager by the defendant since 4 January 2008. In the legal dispute about the termination of his employment, the labour court determined that the employment relationship was terminated effective 31 July 2008. At that time, the plaintiff was entitled to 16 days of vacation. By a letter of 6 January 2009, the plaintiff asked the defendant for payment in lieu of holiday without success. The lower courts dismissed the claim.

The plaintiff’s appeal to the Ninth Senate of the German Federal Labour Court succeeded. Contrary to the view of the lower courts, the plaintiff's entitlement to pay in lieu of holiday did not cease to exist on 31 December 2008 (at the end of the holiday year, as would be the case with holiday entitlement itself). The statutory entitlement to pay in lieu of holiday, as a monetary entitlement only, is not subject to the time-limit regulations of the German Federal Vacation Act. Therefore, the plaintiff did not have to demand payment in lieu of holidays in the 2008 holiday year. What is more, there are no objective reasons why different rules should be applied to employees who are able to work after termination of employment and those who are unable. Therefore even if the employee is unable to work, after termination of employment they are still entitled to payment in lieu of holiday accrued but untaken at the date of termination.

Resources

German Federal Labour Court, judgment of 19 June 2012, reference number: 9 AZR 652/10

Lower court: Higher Labour Court of Berlin-Brandenburg, judgment of 25 March 2010, reference number: 14 Sa 2333/09

For further information or to discuss any of the issues raised, please contact Stefanie Andrelang on +49 (0)89 2422300.