Vacation + vacation allowance has to be granted unconditionally

The Federal Labour Court (Bundesarbeitsgericht) ruled on February 10, 2015 (docket number: 9 AZR 455/13) that an employee’s claim for paid vacation can only be fulfilled either if the vacation allowance (Urlaubsgeld) is paid before the first vacation day or if the vacation allowance is promised unconditionally.

With this judgement the Federal Labour Court changed its over 20 year old practice of allowing the employer to fulfil the vacation claim in cases where vacation is granted only on the condition that a dismissal is unlawful. With this now obsolete practice the employer was able to avoid a payment in lieu of vacation on termination. This option is now restricted significantly. The employer has to grant the vacation allowance unconditionally, otherwise the employee remains entitled to the vacation allowance on termination. However, it is still possible to agree in a written settlement after the termination date that no payment in lieu of vacation has to be made.

This new judgment of the Federal Labour Court has no effect on the lawful option to irrevocably release an employee from the duty to perform his/her work in the event of termination with simultaneous set-off of accrued vacation. In these cases the employee is entitled to his salary/vacation allowance without reservation.