No vacation entitlement during the partial retirement phase

Partial retirement is intended to enable a smooth transition for older employees from working life to retirement. Employers also like to use partial retirement models in order to achieve a socially acceptable adjustment of the workforce. Originally conceived by the legislator as a continuous reduction in working hours, the so-called block model has now become established in practice: The employee who previously worked full-time is still employed full-time during the so-called "work phase" and is then completely released from his or her obligation to perform work during the so-called "release phase" in the legally continuing employment relationship, with continued payment of the average remuneration.

The BAG's decision: After the BAG had already changed its established case law in 2018 and ruled that special leave does not give rise to an entitlement to vacation leave, it now had to decide whether an employee is entitled to vacation leave during the release phase of partial retirement in the block model.

The case was brought by an employee who had agreed partial retirement in a block model with his employer. The employee worked full-time from the beginning of December 2014 until the end of March 2016 and was subsequently released from work until the end of July 2017. The employee was entitled to 30 days of vacation per year under his employment contract. In 2016, the employer granted him 8 days of leave. After his partial retirement ended, the employee demanded compensation for 52 days of leave (22 days for 2016 and 30 days for 2017). He lost his claim for payment at both the labor court and the regional labor court. The action was also unsuccessful at the Federal Labor Court: According to the Federal Labor Court, in the case of a partial retirement employment relationship in the block model, employees in the release phase are not to be treated in the same way as employees who actually worked during this period, either on the basis of statutory provisions or in accordance with Union law. These principles also apply to contractual additional leave if the parties to the employment contract have not reached an agreement deviating from Section 3 (1) BUrlG for the calculation of leave entitlement during partial retirement. An employee who is in the release phase of a partial retirement employment relationship and is released from the obligation to work for the entire calendar year is not entitled to any statutory vacation entitlement due to the lack of an obligation to work. The release phase is to be calculated as "zero" working days.

Conclusion: The ruling is hardly surprising and fits in seamlessly with the BAG's recent decisions that leave entitlements do not arise during special leave freely agreed with the employer. The decision creates further certainty: employers no longer have to fear that claims for compensation for leave will be asserted retrospectively for periods of leave during partial retirement in the block model.

Date: 9. Oct 2019