Employers’ Duty to Inform and Assist
At the end of the year, employees often wonder what will happen to their remaining vacation days if they cannot take them within the calendar year. The good news for employees is that unused vacation does not simply expire. According to the European Court of Justice (ECJ) and the German Federal Labor Court (BAG), this only happens if the employer has actively encouraged the employee to take their vacation and has facilitated it. If the employee still does not take their vacation, their entitlement may indeed expire.
Employees’ entitlement to annual leave is regulated under the Federal Vacation Act (BurlG), which provides a statutory minimum of 24 vacation days per year. However, this figure is somewhat misleading, as it assumes a six-day workweek. For the typical five-day workweek, the minimum entitlement is reduced to 20 vacation days annually, explains the law firm MTR Legal Rechtsanwälte, which also advises on employment law.
Unused Vacation at Year-End
It is not uncommon for employees to have remaining vacation days at the end of the year. Reasons may include operational constraints preventing the employer from approving the vacation or the employee being unable to take it due to illness. In such cases, the unused vacation is typically carried over to the next year and must be taken by March 31.
However, even when no urgent reasons prevented the employee from taking their vacation, it does not automatically expire under ECJ case law. In its rulings on November 6, 2018 (Cases C-619/16 and C-684/16), the ECJ held that vacation entitlement does not automatically expire if the employee has not requested the vacation. Entitlement is lost only if the employer has explicitly informed the employee about the outstanding vacation days and facilitated taking them.
Employee Chooses Not to Take Vacation
Conversely, the vacation entitlement may expire if the employee, despite being adequately informed, knowingly and voluntarily chooses not to take their vacation. However, the burden of proof lies with the employer. If the employment relationship has ended, any financial compensation for unused vacation days may also be forfeited, as the ECJ clarified.
BAG on Expiration of Vacation Entitlement
The German Federal Labor Court aligned with the ECJ’s rulings in its decision on February 19, 2019 (Case No. 9 AZR 541/15). The BAG stated that an employee’s entitlement to paid annual leave generally expires at the end of the year only if the employer has informed them of their specific vacation entitlement and the applicable deadlines, yet the employee still voluntarily chose not to take their vacation.
The BAG further noted that the employer is responsible for scheduling the vacation while taking the employee’s preferences into account. While the employer is not obliged to grant vacation automatically, they carry the initiative burden to ensure the employee’s vacation entitlement is realized. The ECJ and BAG rulings stipulate that employers must ensure employees are genuinely able to take their paid annual leave and, if necessary, formally request that they do so. The employer must also clearly communicate that the vacation entitlement will expire at the end of the relevant period if not taken.
Vacation entitlement generally expires only if the employer has actively requested that the employee take their vacation. Otherwise, the entitlement lapses at the end of the vacation year or the carryover period, as the BAG emphasized.
ECJ: No Statute of Limitations on Vacation Entitlement
The ECJ went further with its rulings on September 22, 2022 (Cases C-120/21; C-518/20; C-727/20). It determined that vacation entitlement is not subject to a statute of limitations if the employer has not encouraged the employee to take their vacation. In such cases, vacation entitlements older than three years also do not expire.
These rulings underscore the importance of employers adhering to their duty to inform and assist.
MTR Legal Rechtsanwälte advises on vacation entitlements and other employment law matters.
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