NEW CHALLENGES FOR VACATION ENTITLEMENT

1. The problem
German vacation law has changed considerably in recent years. The most current question to be decided by both the Federal Labour Court (Bundesarbeitsgericht, BAG) and the European Court of Justice (ECJ) concerned the expiration of vacation entitlements. German law (Sec. 7 para. 3 German Vacation Act, BUrlG) provides that the outstanding vacation entitlement expires at the end of the year. If employees do not assert the vacation claim in time, it is therefore lost at the end of the year.
However. on 6 November 2018, the ECJ (docket number: C-684/16) ruled that the employer must inform the employee of outstanding statuary vacation entitlements (the statutory minimum is 20 vacation days at 5 working days per week). If the employer does not comply with this obligation, the legal consequence, that the entitlement expires at the end of the year, will not occur. Rather, in such a case the vacation entitlement of the past year is added to the entitlement of the new vacation year.
However, it was still unclear how exactly this addition should take place and whether it would be possible for employees to claim vacation entitlements that had not expired due to a violation of the obligation to inform years later. These questions had to be assessed by the Federal Labour Court in its decision.

2. The decision
On 19 February 2019 the Federal Labour Court (docket number: 9 AZR 353/10) ruled that leave entitlements are added to the entitlement of the new year, if (i) the employer has not informed the employee of the remaining vacation entitlement and its possible expiry and (ii) the employee has not been granted the full leave entitlement. Therefore, the employee could also claim the “old” vacation entitlement in the new year.
It also pointed out that this addition of vacation entitlements is not limited to a certain period. Therefore, employees can claim their vacation entitlement even years later.
However if the employer informs the employee in the new year of the remaining vacation entitlement and the possibility of its expiration, the entire vacation entitlement of the new year as well as the added vacation entitlement of the years before may expire at the end of that year. Even if the employer has breached its obligation to inform, it can do so in the following year and thus minimize the risk that one day it must grant endless vacation entitlement.
This obligation to inform applies in principle only to the statutory minimum holiday period. If the employer grants additional vacation days on the basis of a special contractual provision, the employment contract may waive the obligation to inform for these days. However, this differentiation must be sufficiently clear from the contract, therefore legal advice can only be given on the basis of a case-by-case examination.

3. Impact
The decision of the BAG must be given great importance. As many employers probably didn’t expressly inform their employees about outstanding vacation entitlements, they will have to face an enormous amount of employees claiming their outstanding vacation entitlements from previous years. Therefore it is recommended to (i) find out whether the employees were informed; if not: (ii) determine the exact amount of outstanding vacation entitlement for each employee, (iii) inform the employees about the amount of days and the expiration of this entitlement at the end of the year.