Annual Leave: Does the law require employers to remind sick employees to take vacation?

On 7 June 2020, the German Federal Labor Court (FLC) (docket number 9 AZR 401/19) referred a question regarding the compatibility of the expiry of vacation entitlements with EU law to the European Court of Justice (ECJ) for preliminary ruling. This is likely to eliminate remaining legal uncertainties in relation to permanently sick employee’s vacation entitlements if the employer has not informed the employee of the impending expiry.

The facts

In the case, the plaintiff has been continuously incapacitated for work since mid 2017. Although she (theoretically) could have taken her annual vacation for 2017 before her illness, she did not take 14 remaining holidays in 2017. Her employer did not inform her of the impending expiry of her entitlement, nor did he ask her whether she wanted to take her vacation (before the illness). The plaintiff claimed that the Court should declare that she remains entitled to 14 days of vacation because the defendant failed to inform her about the impending forfeiture. After the suit was dismissed in the lower Labor Courts, the FLC doubted whether the expiry after a 15-months period (end of march 2019) is compatible with EU law if the employer did not inform the employee about the impending expiry.

Legal background

Under Section 7 of the German Vacation Act (Bundesurlaubsgesetz), an annual vacation entitlement expires three months after the beginning of the following year. This was the subject of several German and European court decisions in recent years.

Initially, the FLC held that vacation entitlements expired after a maximum of three months, unless otherwise agreed. The ECJ’s ruling in Schultz-Hoff (docket number C‑350/06 & C‑520/06) then changed this fundamentally, and vacation entitlements seemed to be accumulatable for an unlimited period (at least if they could not be taken up). However, a few years later, the ECJ limited the expiration period to 15 months (docket number C-214/10 – KHS). The 15-months period applies, even if the employee was unable to work during this time. The FLC than incorporated the 15-month period into national law.

The issue

The legal problem in the present case is that the FLC (docket number 9 AZR 541/15) as well as the ECJ (docket number C-684/16 – Max Planck ) also found that (in general) the expiration of vacation entitlements only occurs if

  • the employer has previously informed the employee of his specific vacation entitlement and the expiry dates and
  • the employee has nevertheless not taken vacation voluntarily.

In both cases, however, the employee could in fact perform work. In the present case, however, the applicant was unable to work In this situation, the extent of the employer’s obligation to inform and the employees responsibility to take his annual vacation remain apparently unclear.

In the present case, the employer (obviously) has not fulfilled his obligation to inform. However, for the lower courts, the obligation to inform logically does not apply if the employee is unable to work: Reminding her of her vacation entitlements is only practical if the employee is able to take vacation in the first place. The FLC considers the criteria in Max Planck alongside the KHS ruling. For the FLC, the substantive reach of the obligation to inform might include cases where the employee is unable to work. Therefore it remains open, whether the application of the 15-months expiration period (without any further information to the employee)violates EU law.

The impact

The extent of the obligation to inform is a legal issue of considerable practical importance. It is already important to inform employees who are not ill at the end of the year of the expiry of their leave if they do not take it. It will now be up to the European Court to clearly distinguish the cases of voluntary refusal to take annual vacation and incapacitation. In the latter case, the assessment of the lower courts is convincing. The idea of the information is to warn the employee of the consequences of not taking the leave. However, this implies that it must be possible to take the leave. Therefore, the obligation to inform should naturally be limited to situations where the employee is still able to take a vacation. However, only the judgment of the European Court of Justice can provide certainty  – the ECJ’s decision is expected in 2021.

Article written by Tom Stiebert and Nicolas Pohl