CJEU to Decide on Limitation Periods for Entitlement to Paid Leave.

 Federal Labor Court Refers Question to the CJEU – Ref.: 9 AZR 266/20 (A).

CJEU to Decide on Limitation Periods for Entitlement to Paid Leave.

The Federal Labor Court once again referred a question regarding paid leave to the Court of Justice of the European Union (CJEU). The CJEU is now expected to decide whether it is possible for employees to accumulate vacation days for an unlimited time period or whether entitlement to paid leave is subject to a limitation period.

In principle, the right to the statutory minimum paid leave only expires at the end of the calendar year; or of an extension period, if the employer contributed and informed the employee of the expiry date of untaken vacation days (see further: Labor Courts tighten companies’ information obligations regarding vacation claims).

The Federal Labor Court had to clarify whether the entitlement to paid leave is subject to the limitation period if the employer did not specifically request the employee to take his/her vacation or explain that the entitlement to the vacation days would otherwise expire. The Federal Labor Court temporarily postponed the decision by decision of September 29, 2020 and referred the question to the CJEU for a preliminary ruling (Ref.: 9 AZR 266/20 (A)).

More Than 100 Vacation Days Accumulated

In the underlying case, an employee had requested compensation for a total of 101 vacation days that she had collected over several years. On March 1, 2012, the employer had already assured her that her remaining leave entitlement of 76 days (from calendar year 2011) would not expire on March 31, 2012, since she had not been able to take the leave due to an increased workload. Additional unused vacation days accumulated in the following years. The plaintiff finally demanded compensation for 101 vacation days in February 2018.

The employer countered this by arguing the limitation period. The employer stated that the three-year limitation period had already elapsed before the employment relationship ended in 2017.

District Labor Court Düsseldorf Sees Employer’s Duty to Contribute and Inform

The District Labor Court Düsseldorf did not follow this argumentation at first instance. The court decided that the plaintiff was eligible for compensation for 76 unused vacation days from the years 2013 to 2016 (compensation was not granted for the full 101 vacation days requested due to the fact that the plaintiff could only substantiate the existence of 76 remaining vacation days). Ultimately, it could remain undecided why limitation periods should be denied for vacation claims. It could follow from the fact that the general limitation rules in the German Civil Code were superseded by the independent limitation period regime in Article 7 para. 3 of the German Federal Holiday Benefits Act per se, the latter being a more specific regulation. Alternatively, it could also be argued, following the decisions of the Federal Labor Court of February 19, 2019 and June 25, 2019 (Ref.: 9 AZR 423/16; 9 AZR 546/17), that in cases where the employer does not fulfill its duty to contribute and to inform – as in the present case, the “old” paid leave entitlement merges with the leave entitlement arising every year and shares the same fate. In any case, the paid leave entitlement does not expire by limitation, the District Labor Court Düsseldorf ruled (Ref.: 10 Sa 180/19).

Federal Labor Court Leaves Limitation Period Open

The Federal Labor Court now confirmed that leave entitlements cannot expire pursuant to Art. 7 Para. 3 of the German Federal Holiday Benefits Act if the employer did not fulfill the duty to contribute and to inform. In the present case, the employer had not fulfilled this duty. However, the Federal Labor Court then left the question open whether leave entitlement which cannot expire can still be subject to the limitation period pursuant to Articles 194 et seq. of the German Civil Code. This important question is now to be answered by the CJEU.

Vacation in the Case of Continuing Illness

The question of the expiration of leave entitlements and the duty to contribute and to inform of employers has been a subject of concern to the courts for some time. Yet there are still some uncertainties, especially in cases of overlapping sick leave and paid vacation (see for example Bruck, “Unlimited vacation now also with regard to illness?”, DB 2020, 562). In this context, the Federal Labor Court recently referred to the CJEU to clarify whether EU law still allows the leave entitlement to expire 15 months or more following the end of the vacation year, in the case of an uninterrupted illness of the employee, even if the employer has not fulfilled its duty to contribute and to inform, and even if the employee could have taken at least part of his/her vacation before he/she became unable to work (Federal Labor Court, CJEU submission of July 7, 2020 – Ref.: 9 AZR 401/19 (A)).

Possibly unlimited accumulation of leave entitlements is therefore not just an issue in the present reference to the CJEU. The CJEU will now issue a statement on the limitation period. It is to be hoped that the CJEU’s decision will further contribute to the clarification and development of paid leave entitlement.

Should the CJEU thereby decide in the other procedure mentioned above, (Ref.: 9 AZR 401/19 (A)), that the leave entitlement does not expire after 15 months if the employer does not contribute and does not inform the employee accordingly, the limitation period of the leave entitlement will also be crucial.

The CJEU’s decision on the limitation period for leave entitlements can be indicatory. If the claims were subject to the limitation period, this would be in favor of the employers and would at least somewhat relieve their duties to contribute and inform.