The ruling of the German Federal Labour Court of 19 February 2019 has resulted in a new approach to vacation law. The judgment has a significant impact on how vacation claims will have to be handled in future practice by employers. As you may remember from our previous newsletters, following case law by the European Court of Justice, the German Federal Court has ruled that vacation not taken does not expire automatically anymore. According to the latest case law, an employee’s vacation entitlement only expires at the end of a calendar year if the employer has previously informed the employee about the specific entitlement, the expiry periods and the employee has still not taken the vacation.
The ruling provides important practical information on how employees need to be informed about their vacation entitlement in order to enable the forfeiture of vacation entitlement. As part of its duties, the employer is obliged to refer to a “specific” vacation entitlement for a certain year and in doing so maintain “complete transparency”.
According to the Federal Labour Court, abstract information on the expiry of vacation entitlement, such as in the employment contract, in an information sheet or in a collective agreement, is generally not sufficient to meet these requirements and enable the forfeiture of vacation entitlement. However, it should not be necessary for the employer to constantly update the information about the specific scope of vacation entitlement. Nevertheless, the circumstances of each individual case are always decisive in order to determine if a vacation entitlement has effectively expired.
The employer can satisfy requirements under new case law by:
We would at this stage, whilst case law is still evolving, recommend the following approach to employers:
- At the beginning of each calendar year
- Provide the individual employee with written information on how many days of vacation they are entitled to for the year including any transferred days from previous years
- Remind employees to apply for vacation in time so that it can be taken within the current calendar year
- Inform employees that vacation entitlement will expire at year end if the employee was able to take vacation in the calendar year but did not apply for it
- In Q3, at the latest in September:
- Give every employee an individual notice of the exact number of their outstanding days of vacation, including remaining vacation from previous years
- Remind the employee to take the vacation until year end
- Inform the employee clearly that their vacation entitlement will expire at the end of the calendar year if not taken
- In Q4, at the latest in November:
- Send a further reminder like in Q3
Any information and request to the employee should at least be made in text form: e.g. via e-mail. The communication should be marked as important and a read receipt should be requested. If confirmation of reading is not received, the receipt should be ensured by other means and documented. In the overall process of course regulations regarding vacation from collective agreements that may add further requirements should be observed.
As per our last newsletter article of July the Cologne Regional Labour Court recently ruled that the employer’s obligation to ask its employees to take vacation is not limited to the vacation entitlement of each year, but also applies for previous years. Consequently, employees can enforce their vacation entitlement also from previous years, because the holiday entitlement will only expire if the employer has explicitly asked its employees to take vacation.
So far, the Federal Labour Court has not decided whether there should actually be no limitation at all for building up vacation entitlements over several years, if the employer has not properly informed its employees on outstanding vacation entitlement. The Cologne Court granted the employee outstanding vacation entitlement from the last three years. Whether the courts will develop a general upper limit or if the statutory limitation period of three years from the end of each year applies, remains to be seen. Until the Federal Labour Court has decided such question, it may be recommendable to inform as comprehensively as possible, however, if informing about days not taken in the last years, this may of course also unnecessarily “wake sleeping dogs”.