Holidays – more expensive than you might think?

An employer must reimburse its employees for unused holiday entitlement, even if the employee in question has been absent for the entire year.   The plaintiff – a nurse – filed a lawsuit for payment in lieu of holidays at the Federal Labour Court (Bundesarbeitsgericht, BAG).  The plaintiff had been employed since 2002.   Starting January 1, 2011, she took unpaid leave of absence on the basis of a contractual agreement which lasted until the end of her employment contract on September 30, 2011. The plaintiff did not take her statutory holidays for the year.

The Federal Labour Court (Bundesarbeitsgericht, BAG) decided that the employer was obliged to reimburse the employee for untaken holidays even though the employee had not worked at all during the previous year  (ruling dated May 6, 2014, docket number: 9 AZR 678/12). Moreover, the employee was generally entitled to the entire holiday entitlement.   A leave of absence does not allow the employer to reduce the holiday entitlement on a pro-rata basis. Moreover, the Federal Labour Court specifically pointed out that the statutory holiday entitlement provided by the Federal Vacation Act (Bundesurlaubsgesetz, BUrlG) may not be waived. 

Based on this decision, it is advisable for employers to grant holiday accrued during the employment relationship, to avoid accumulating liability risks.   In the case of an unpaid leave of absence on the basis of a contractual agreement, it should be regulated in the agreement that any additional contractual holiday entitlement, which does not fall under the strict provisions of the Federal Vacation Act, shall be reduced on a pro-rata basis.