News from the EuGH and BAG on vacation law

No limitation of vacation claims without clarification and information by the employer

The end of the year 2022 has provided a new highlight in vacation law through decisions by the ECJ and BAG. The decisions relate in particular to those constellations in which an employee* has left the employer* and now demands compensation payments for vacation not taken in the past. However, they are also relevant for vacation not taken in the current employment relationship. Insofar as the three-year period from Section 195 of the German Civil Code has expired, an employer will raise the defense of limitation. The ECJ and BAG have now made this considerably more difficult. Previously, the fulfillment of certain obligations to request and notify by the employer was only relevant to the question of the forfeiture of vacation. However, according to the new case law, the fulfillment of such obligations to request and notify is now also relevant for the question of the statute of limitations for vacation claims.

I. Previous state of case law: No forfeiture of vacation in case of failure to notify employer

According to German law, vacation must be granted and taken in the current calendar year (Section 7 (3) sentence 1 BUrlG). Carrying over vacation to the next calendar year is only possible for urgent operational reasons or reasons relating to the employee (Section 7 (3) sentence 2 BUrlG). In the event of such a carryover, the vacation must be granted and taken in the first three months of the following year (i.e. by March 31), otherwise the vacation entitlement is forfeited (Section 7 (3) sentence 3 BUrlG).

However, these quite clear regulations have been massively influenced in recent years by the case law of the ECJ and BAG. This is because German vacation law is significantly influenced by the requirements of European law and, in particular, the European Working Time Directive (2003/88/EC). Thus, according to the decisions of the ECJ of 06.11.2018 (C-684/16) and the BAG of 19.02.2019 (9 AZR 541/15), the forfeiture of vacation entitlements additionally requires that the employer has informed the employee and given certain instructions. The employer must have specifically requested the employee to take the leave beforehand and must have clearly and timely informed the employee that the leave would otherwise expire at the end of the leave year or the carryover period.

II. Decision of the ECJ of 22.09.2022: No statute of limitations in the event of failure to take leave

These principles previously developed for the forfeiture of leave have now been extended by the ECJ to cases of limitation. On Sept. 22, 2022 (C-120/21), the ECJ ruled that vacation entitlement under Article 7(1) of the Working Time Directive may not be time-barred if the employer did not actually enable the employee to take the vacation. Any other result would violate the fundamental protection of vacation under European law (Art. 31(2) Charter of Fundamental Rights). The protection of vacation deserves priority over the employer's interest in legal certainty if the employer has not sufficiently enabled the employee to take vacation. This is because in such cases the employer has placed itself in the situation of being confronted with vacation claims from the past.

III. decision of the BAG of 20.12.2022: No limitation of vacation in case of omitted notice by the employer

In its decision of 20.12.2022 (9 AZR 266/20), the BAG implemented the decision of the ECJ and interpreted German law in conformity with the Directive. According to the BAG, it is mandatory for the limitation of vacation claims that the employer has complied with its obligations to request and notify.

The provisions on the statute of limitations (Sections 194 (1), 195, 214 (1) BGB) also apply in principle to the vacation entitlement under Sections 1, 3 BUrlG. Accordingly, vacation claims also become time-barred after three years. However, the decisive question is when the three-year limitation period begins. In principle, the limitation period begins at the end of the year in which the claim arose (see Section 199 (1) BGB). However, according to the decision of the BAG, something different is to apply to vacation entitlement. The statute of limitations for vacation claims therefore only begins at the end of the year in which the employer informs the employee of his specific vacation claim and the expiration periods and the employee nevertheless does not take the vacation of his own free will.

IV. Outlook

From the employer's point of view, it is now more important than ever to request the employee to take the vacation in accordance with the requirements of case law and to inform him of the otherwise threatening forfeiture of the vacation entitlement. Since the statute of limitations does not begin to run until this request and information have been given, it should be checked in the case of previously omitted information whether the information should be made up for. According to the press release of the BAG, it should be possible to make up for the omissions. The reasons for the BAG ruling remain to be seen. From a tactical point of view, it must be considered to what extent the employer wants to wake sleeping dogs.

The situation becomes problematic for the employer if it is confronted with vacation (settlement) claims - sometimes dating back a long time - even before the statute of limitations has expired since the notices were issued. Neither forfeiture of vacation nor the statute of limitations can save the employer in this situation. Whether case law will permit forfeiture by virtue of preclusive periods in employment contracts or collective agreements has not been conclusively clarified and may be doubted. As a last resort, the principles of forfeiture could be considered. However, it will often be at least questionable whether the strict conditions for this are met. Every employer can therefore only be advised to fulfill the obligations to clarify and provide information in good time from the outset.

It remains an exciting question to what extent the employer has room for maneuver with regard to any additional contractual leave.

* All references to persons apply equally to all genders. The generic masculine form is used solely for reasons of better readability.