A sales assistant from Essen who does bakery work three days per week took legal action. Due to the loss of work caused by the Corona pandemic, her employer implemented short-time work, and concluded a short-time work agreement with the plaintiff. The saleswoman was then released from work in April, May and October 2020. In November and December 2020, she only worked a total of five days.
The defendant then reduced her vacation entitlement from 14 to 11.5 working days for 2020. In response, the saleswoman filed a complaint against this and argued that work days lost because of short-time work had to count as work days in terms of vacation law. Therefore, she would be entitled to an additional 2.5 vacation days for 2020.
Work days lost because of short-time work do not count towards accrued leave
The Federal Labor Court (BAG) took a different view as had the State Courts in Düsseldorf and Essen in previous decisions: If entire working days are lost due to short-time work, employers may recalculate, and reduce the vacation entitlement. The lost working days do not correspond to mandatory work periods in terms of either national law or union law. Accordingly, the Erfurt judges ruled that the saleswoman was not entitled to more than the 11.5 vacation days calculated by her employer.
Calculation based on Federal Labor Court rulings regarding special leave and semi-retirement
This is based on the following calculation: According to Section 3 (1) of the German Federal Leave Act, the minimum entitlement to paid annual leave is 24 days if work is distributed evenly over six days per week. If employees work more or fewer days in a calendar week, the amount of leave is calculated on the basis of the number of agreed days with mandatory work in order to ensure equal leave for all employees. The following formula applies as per previous Federal Labor Court decisions regarding unpaid special leave and the release phase in the case of semi-retirement: 24 work days x number of days with work obligations divided by 312 working days. In the current case, the plaintiff was even entitled to a vacation of 28 working days per year, namely four additional working days of leave. Given the plaintiff’s contractual agreement stipulating a three-day week, she is entitled to 14 days of annual leave as a result (28 working days x 156 days with mandatory work divided by 312 working days). Taking into account the three months entirely without work, Federal Labor Court calculations indicate that the saleswoman would only be entitled to 10.5 vacation days instead of the 11.5 calculated by the employer (28 working days x 117 days with mandatory work divided by 312 working days).
This also applies if the short-time work is based on an effective works agreement, as the Ninth Senate ruled in another case.
Ruling closes loophole in the Federal Vacation Act
The decision has far-reaching practical consequences. According to the Institute for Employment Research (IAB), 34 percent of all companies applied for short-time work in 2020. The IAB survey states that employees in every sixth company were affected by temporary layoffs. Up until now, only one in nine companies has proportionately reduced employees’ vacation entitlement. This could also be a consequence of the associated legal uncertainty surrounding the issue thus far. As the fourth Corona wave progresses, applications for short-time work in the hospitality industry, for example, are once again increasing, as shown by recent statistics from the Federal Labor Office. The Federal Ministry of Labor has extended easier access to short-time work until March 31, 2022.
The Federal Labor Court made a landmark decision and closed a regulatory loophole in the Federal Leave Act concerning temporary layoffs. To date, only a small number of companies has proportionally reduced employee leave. However, this could change now that legal clarity has been established and the pandemic has begun causing many companies financial difficulties for the fourth time. The decision could ultimately affect the vacation planning of tens of thousands of employees on short-time work. Leave already taken is not affected by the ruling.