The ECJ, the BAG and German vacation law No automatic expiry of leave at the end of the year, ECJ, judgment of 06.11.2018, Ref. C-619/16

1. no automatic expiry of leave at the end of the year, ECJ, judgment of 06.11.2018, Ref. C-619/16

The ECJ ruled in favor of a trainee lawyer who claimed compensation for untaken leave after completing his legal clerkship, even though he had not applied for any leave at all. The ECJ sees an obligation on the employer to actually put the employee in a position to take their vacation days in good time and to provide transparent information about the forfeiture of vacation days not taken. The employer bears the burden of proof for this. If the employer fails to provide such information, leave entitlements no longer expire at the end of the year, even without an application. If the employer can provide proof that the employee has provided information and the employee actually had the opportunity to take leave, the leave will continue to expire in accordance with Section 7 (3) BUrlG. This is because, according to the ECJ, EU law does not preclude a regulation according to which a claim to financial compensation is also excluded upon termination of the employment relationship.

Conclusion: It is still unclear what the individual consequences will be with regard to the employer's duty of disclosure. The Federal Labour Court will probably have to make more specific statements in this regard. For the time being, employers are advised to clearly and transparently inform their employees that they risk forfeiting their leave at the end of the year if it is not taken by then. Employees must also be given the actual opportunity to take the leave.

The ECJ's ruling only referred to the statutory minimum leave. If employment contracts permissibly separate the leave entitlement into statutory and non-statutory leave and stipulate that leave is initially offset against the statutory leave entitlement, the statutory leave entitlement will generally already have been taken by the end of the year and only the non-statutory leave entitlement will be subject to forfeiture. This contractual arrangement limits the risk for employers.

2. vacation compensation claims are inheritable, ECJ, judgment of 06.11.2018, Ref. C-569/16 and C-570/16 and BAG, judgment of 22.01.2019 - 9 AZR 45/16

If an employee dies during the employment relationship and there are still vacation entitlements at the time of death, these are part of the estate and a corresponding claim for compensation against the employer is transferred to the heirs, according to the ECJ. It is irrelevant whether the employment relationship ended as a result of the employee's death or had already ended in another way. The ECJ explained that leave has two components: a temporal and a financial component. The financial component was not extinguished by the death of the employee and could therefore also be inherited. Conflicting national regulations were not compatible with EU law.

This decision of the ECJ is in contrast to the previous case law of the Federal Labour Court, which had only recognized a compensation of vacation entitlements for heirs if the deceased had left the employment relationship before his death and the vacation entitlement had therefore already been converted into a monetary vacation compensation. Under German vacation law, there is no such thing as vacation pay in lieu of leave in the current employment relationship, as the purpose of the leave is to allow the employee to relax and not as a financial benefit for not taking leave. Only vacation entitlements that still exist at the time of termination of the employment relationship are converted into a compensation claim upon termination. However, if an employee dies during the employment relationship, the death of the employee and not the termination of the employment relationship within the meaning of Section 7 IV BUrlG means that the leave can no longer be taken. Upon death, the granting of leave becomes impossible and the entitlement is lost. According to the previous opinion of the Federal Labor Court, if there is no longer an entitlement to the granting of leave, it cannot be replaced by money.

Conclusion: The different rulings of the ECJ and the BAG can only be understood if one considers the respective views of the courts: While the BAG considers vacation to be something highly personal to which the individual employee is entitled, the ECJ sees not only the right to rest but also a purely financial component to "paid annual leave", which can be inherited as a pecuniary claim without further ado.

Update: In its decision of 22.01.2019 - 9 AZR 45/16, the Federal Labor Court already implemented the ECJ's requirements and ruled that not only the statutory minimum leave entitlement must be compensated in the event of the employee's death, but also the additional leave for severely disabled persons and entitlements under the TVöD that go beyond the statutory minimum leave entitlement