Judgement of the German Federal Labor Court: What employers need to know about holiday entitlements

The year 2019 is coming to an end. Now at the latest, employers should deal with the holiday entitlements of their employees. Due to a recent judgement of the German Federal Labor Court, employers need to act with regard to the transfer of holidays to the next calendar year.

What has changed?

In its recent judgment (9 AZR 423/16), the Federal Labor Court followed the case law of the European Court of Justice (C-684/16), according to which holiday entitlements no longer expire automatically. Previously, holiday entitlements had expired at the end of the calendar year or at the end of March of the following year pursuant to § 7 (3) BUrlG if employees had not submitted a holiday application.

Now the European Court of Justice ruled that the holiday entitlement expires only if the employer ensured, specifically and transparently, that the employee was actually able to take the holiday to which he/she is entitled, by encouraging him/her, to do so.

What must be done now?

Companies therefore need to act: Employees must be informed explicitly of their holiday entitlements and their possible expiry at the end of the year and they must be told to apply for the holiday in good time. Otherwise employees will be entitled to their holiday claims of 2019 even in 2020. 

Employers should therefore send employees in writing (e.g. by e-mail or letter) a notification in which they

• inform employees how many days of holiday they are entitled to in a calendar year,
• request that employees apply to take their holidays within the current calendar year, and
• inform employees that, generally, holiday claims expire at the end of the calendar year if not applied for accordingly.

The Federal Labor Court did not explicitly require that concrete information is included on how many days of holiday claim the employee still has at the time of the notification. However, it cannot be ruled out that the courts will demand this in the future. Therefore, it is advisable to inform employees about their remaining holidays if such information is available without major effort. 
The judgement does not require employers to update this notification, for example about any change in the number of days of leave still available. However, purely abstract information, such as in the employment contract or in a collective agreement, is not sufficient.

When does the information need to be given?

The Federal Labor Court requires that employees are notified in good time. There must be sufficient time for the employee to actually take the holiday. The court assumes that such notification may be made at the beginning of the calendar year. If not done so already, the information should therefore be given as soon as possible.

What does this mean for previous years?

The judgments of the Federal Labor Court and the European Court of Justice are not only important for the current year: As confirmed by the Regional Labor Court of Cologne (4 Sa 242/18), these principles also apply to holiday claims from previous calendar years. This may become particularly relevant in the context of employees leaving the company who may now demand higher holiday compensation claims. In these cases, however, preclusion periods and general limitation periods must be observed.