Expiry of vacation entitlements at the end of the year

Friday, 09.12.2022

According to Section 7 (3) of the German Federal Leave Act, the minimum leave of four weeks expires at the end of the year if it is not granted. Carryover to the next year is only provided for if the leave cannot be taken in the current year for urgent operational or personal reasons. And even then, the vacation must be taken by March 31 of the following year, otherwise it will be forfeited.

Employers’ duty to inform

However, it is not quite as simple as that: in addition to the Federal Leave Act, the EU Directive 2003/88/EC must also be observed. According to the case law of the European Court of Justice (ECJ, judgment of 06.11.2018, C-684/16 [Shimizu], para.45) and the Federal Labor Court (BAG, judgment of 19.02.2019, 9 AZR 541/15, para.30), vacation does not automatically expire at the end of the calendar year or the carryover period thereafter. Rather, employers must cooperate: They must inform their employees in good time of the risk of vacation expiring and request them to take the vacation that is still open. Only then can the vacation entitlement be forfeited.

Expiry of vacation entitlement after three years

Without this notice, the vacation does not expire at the end of the year, but is added to the vacation entitlement of the following year. In this way, increasingly higher vacation entitlements can be accumulated over the years. In the fall of 2022, the European Court of Justice now also had to rule on the question of whether vacation entitlements, if they do not expire at the end of the year, are then nevertheless subject to the regular limitation period of 3 years in accordance with sections 195, 199 of the German Civil Code. This question had been submitted to the ECJ by the Federal Labor Court two years ago, BAG, decision of 29.09.2020, 9 AZR 266/20. The ECJ (ECJ, judgment of 22.09.2022, C-120/21) has now ruled:

Employers can also only invoke the statute of limitations for vacation claims after three years if they have previously fulfilled their obligations to inform and cooperate under vacation law. Otherwise, the employer himself has contributed to the fact that increasingly higher vacation entitlements have been accumulated. The employer cannot subsequently invoke the statute of limitations for these claims.

The situation is different in the case of long-term sick employees: Here, the ECJ also recognizes a protective interest of the employer. In these cases, vacation claims expire fifteen months after the end of the calendar year in which they arose, i.e. on March 31 of the year after next.

Practical tip

With the latest ECJ ruling, it has become even more important for employers to fulfill their obligation to provide information. For this purpose, a simple letter to the employees is sufficient, in which the individually remaining vacation days are stated and the employees are requested to take the vacation before the end of the carryover period. It is also important to point out that otherwise the vacation will be forfeited.