Vacation law holds pitfalls for employers. Employers and employees often end up in court disputing compensation claims for vacation not taken. According to established case law, the entitlement to leave pursuant to Section 7 (3) of the German Federal Leave Act does not automatically expire on December 31 or March 31 of the following year. Rather, according to the European Court of Justice, employers have a duty to cooperate. They are required to inform employees that forfeiture is imminent and to encourage the employee to take their remaining leave (C-619/16 and C-684/16).
Employer’s information obligation
In the event of a long-term illness,the Federal Labor Court has decided that the following always applies: Entitlement to leave generally does not expire until 15 months after the end of the leave year. This means that employees who fall ill in 2022 and, therefore, forgo days off can no longer claim their entitlement after the end of March 31, 2024.
Inability to work for multiple years
But what applies if employees are consistently unable to work for a period of more than 15 months and, therefore, cannot take time off anyway? This question has now been resolved by the Hamm State Labor Court (LAG): The legal action was filed by an employee of a cleaning company who had been unable to work since 2010 due to severe nerve damage to his hand and deformation of several fingers. After the employment relationship was terminated, the plaintiff demanded compensation for 30 vacation days each for the years 2016 and 2017. He had been consistently unable to work during this period. According to the complaint, the defendant had failed to fulfill its obligation to inform the employee of the imminent forfeiture of vacation for the years 2016 and 2017.
Hamm State Labor Court: Limitation of vacation entitlement does not depend on the information obligation if taking the leave is objectively impossible
The judges of the Hamm State Labor Court saw the matter differently: Although employers were also required to cooperate during long-term illness spanning multiple years, the issue was not whether the employer had fulfilled their duty to cooperate, as the plaintiff was permanently unable to work. As a result, he had not been in a position to take the leave at all by taking time off “in kind”. According to the judges, the information obligation serves exclusively to ensure that the employee is actually in a position to exercise their leave entitlement. Conversely, they are not obliged to enable the employee to claim compensation.
Federal Labor Court: No information obligation after the first year if employees are on sick leave for the entire year
However, the Hamm State Labor Court permitted the appeal to the Federal Labor Court. The appeal was justified by the fact that the question of the effects of a lack of cooperation by the employer if an employee is off sick for several years had not yet been resolved by the Federal Labor Court. However, the highest labor judges in Erfurt had already issued a ruling on September 7, 2021: They stated that the plaintiff’s entitlement to leave had lapsed even though the defendant employer had failed to comply with its information and request obligations towards the plaintiff. The only causal factor determining the lack of opportunity to take leave was the plaintiff’s prolonged illness and not the defendant’s failure to cooperate. This is always true
- if the employee has remained continuously unable for work since the beginning of the leave year until March 31 of the second calendar year following that leave year.
- or if the ongoing inability to work up until that point occurred during the leave year and it was not possible to grant the employee (further) leave before they fell ill.
Now, it is clear that information obligations are only an issue in the first year of prolonged illness. This concerns previously unfulfilled claims to paid annual leave of an employee who became unable to work during the course of the leave year, and who could still have taken (at least part of) their leave during the leave year before falling ill. According to the Federal Labor Court, this no longer applies after that period. The Hamm State Labor Court reaches the same conclusion: When justifying their ruling, the judges referred to the Order of Reference of the Federal Labor Court to the European Court of Justice (ECJ) dated July 7, 2020: This explicitly concerns the question of the effect of a lack of cooperation if the inability to work occurs during a leave year.
Vacation law can prove problematic for HR. We describe how to avoid these issues in our blog post “Vacation law: Nine common questions and answers about the best time of the year”. In view of the judgments by the Hamm State Labor Court and the Federal Labor Court, HR managers now at least no longer have to face compensation claims that have accumulated during several years of sick leave. Now, any information obligations can only be contested for the first year of a prolonged illness. Nevertheless, HR managers need to keep a close eye on national and European case law concerning leave. For example, this also applies to the ECJ’s decision on the Federal Labor Court’s order for reference: According to the Opinion from the Advocate General, Jean Richard de la Tour, dated March 17, 2022, exceptions to the notification obligation must be interpreted strictly.