In addition to the actual termination of the employment relationship, termination agreements or court settlements regulate numerous other points in order to conclusively settle the employment relationship. This includes the settlement of outstanding holiday entitlements or the avoidance of holiday compensation.
To avoid an obvious waiver of holiday entitlement, which is invalid, employers and employees often agree that ‘holiday entitlements are granted in kind.’ If, for example, the employee has not taken any holiday due to illness, this statement would simply be incorrect. The Federal Labour Court (BAG) (judgment of 3 June 2025 – 9 AZR 104/24) considers this to be a de facto waiver of holiday entitlement. If the employment relationship had not yet ended at the time of the settlement, this is not possible.
The employee can then subsequently demand holiday compensation.
However, if it is actually disputed whether holiday entitlements still exist or if the employment relationship has already ended when the settlement is concluded, such a clause can still be used.
In addition, this case law only refers to statutory holiday entitlement. If the employer grants holiday entitlements exceeding the minimum holiday entitlement, the employee can also waive these.
Caution is advised when settling non-waivable entitlements, such as holiday entitlements. A settlement clause can quickly become worthless.
The most important points in brief
- A blanket statement that holiday entitlements were granted ‘in kind’ is inadmissible in the current employment relationship if the holiday was not actually taken – especially in the case of illness.
- This constitutes a waiver of the statutory minimum holiday entitlement, which is inadmissible during an existing employment relationship.
- It would also be conceivable to grant leave in lieu of holiday entitlement, at least if the employee is no longer ill.
