News on vacation law

On December 20, 2022, the Federal Labor Court ruled that vacation does not expire after three years if the employer has not previously fulfilled its obligation to inform the employee about the extent and imminent expiration of remaining vacation (Case No. 9 AZR 266/20).

As expected, the Erfurt judges thus implemented a decision of the European Court of Justice (ECJ) from September into German law, thus strengthening employee rights. According to the landmark ruling of the Federal Labor Court, employers must actively inform their employees of existing vacation entitlements and warn them that these will expire if no vacation application is submitted. If such a warning is not given, vacation or remaining vacation can still be claimed years later. A generally applicable three-year statute of limitations "only begins at the end of the calendar year in which the employer informs the employee of his or her specific vacation entitlement and the expiration periods and the employee nevertheless has not taken the vacation of his or her own free will," the court stated.

Even though this decision was already expected and therefore did not come as a surprise, the further consequences and, above all, the scope of this decision cannot yet be predicted with certainty. Opinions differ as to whether the ruling could even lead to a wave of lawsuits by former employees, including how long it will be possible to go back into the past. The court left this period open. At present, we also assume that the current ruling only affects vacation that actually still exists and can be granted in existing employment relationships, but not financial vacation compensation claims after termination of the employment relationship.

As a general rule, vacation in the event of long-term illness does not expire until 15 months after the end of the vacation year. This principle was confirmed once again by the Federal Labor Court. However, vacation does not expire even if employees have worked at least part of the year in question and the company did not comply with its information obligations.

PBC legal takeaways: The workforce should be automatically informed at the beginning and towards the end of the calendar year about existing vacation credits as well as about an impending forfeiture in case of non-application. In the coming months, follow-on labor court cases will most likely provide further clarity on the options and timeframes for vacation forfeiture. We will keep you informed.